SME Finance in New Zealand
New Zealand is recognised as No.1 in terms of ease of doing business 12 years in row.
It is one of the largest Milk and Agriculture producer and exporter. It is a nation of Small and Micro Business-including self-employed. Small Businesses are defined as fewer than 20 employees (compared to 49 elsewhere), represent 530,000 businesses in NZ (roughly 97% of all firms) and account for 28% of Employment and contribute more than 25% of GDP. (Data Source: STATS NZ).
NZ companies are highly innovative and consistently punch above their weight when it comes to new technologies (Xero, Pacific Edge). It is a land of opportunities and consistently attract high calibre and motivated individuals to come down to this beautiful place and settle here. These individuals not only add diversity but also contribute to talent pool available for the local companies. A high percentage of these individuals start their entrepreneurial journey after spending 5-6 years in NZ.
A small business is typically started with the individual savings of directors and shareholders, but they face an uphill task when they are looking to expand and grow their business. Traditional Financial Institutions have their set of policies and guidelines which are not favourable for small businesses. They have a higher risk weighting for business lending and typically the turnaround time for a small loan can be easily 2-3 weeks. During Covid period most of the small business owners suffered decline in their revenues which again make their business case weaker. This situation has given a big push for non-traditional lenders to look at this space and come out with innovative solutions and structures to help SMEs unlock their potential. We decided to venture in this space seeing a big need for lending services in SME sector and how we can work with businesses to increase their profitability and help them grow.