Increased business confidence drives capital demand

Lender says its loan originations have risen by 265%

Increased business confidence drives capital demand

With the housing market showing no signs of slowing down, advisers have been focused squarely on the mortgage space – however, Prospa New Zealand general manager Adrienne Church says opportunities in the small business lending sector may be huge, as demand for capital is increasing day by day.

Church noted Xero’s data, which shows that small business revenue is steadily picking back up and that employment actually grew 1.4% over the course of the year. She says Prospa’s loan originations grew by 265% in the September quarter, and the boost in confidence and demand is continuing into the busy holiday period.

“During the height of the pandemic and strict lockdowns, many small businesses naturally cut costs as they battened down the hatches,” Church explained. “Even as restrictions lifted, the uncertainty of 2020 meant a lot of major investment decisions were put on hold, including renovations, expanding the team, or purchasing new equipment.

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“With confidence retuning, many small business owners will be looking to re-stock, re-hire, re-equip, and re-invest in new sales channels and products and services. “

“Small businesses also continue to be impacted by COVID-related supply chain disruptions, particularly when it comes to overseas products,” she continued.

“Not only does this mean they are more likely to be purchasing in bulk to avoid running out of stock, but many wholesalers are also adjusting their terms to payment on delivery. For advisers, that could mean more small businesses will need funding to cover those costs upfront.”

Church says late invoice payments have also been creating a “cash squeeze” for many small businesses, while others will be looking to future-proof and invest in technology – both of which will push an ongoing demand for capital.

“The restrictions were an unprecedented digital transformation experiment, and many will be keen to take advantage of these productivity and efficiency gains,” Church said.

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“These include videoconferencing and cloud-based file sharing systems, and the digitisation of customer channels, for example, via e-commerce, mobile apps or chatbots.”

“Small business access to capital will be key to New Zealand’s economic recovery as the sector starts to reboot, rebuild, and find new opportunities to grow and prosper,” she concluded.

“Advisers have a crucial role to play helping small businesses understand their options and navigate the different funding solutions beyond the banks. For advisers that have considered diversifying into small business lending, now is the time.”