SME funding in the Year of the Water Rabbit

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Small businesses are feeling more optimistic about 2023, and Prospa has the tools to quickly provide them with funding as they rise to the challenges ahead

AS THE working year gets into full swing – and with the Lunar New Year celebrations behind us – non-bank lender Prospa is gearing up for small business to be busy in 2023. Prospa has started the year with a bang and launched a brand-new look, marking the company’s evolution and new growth in New Zealand. Adrienne Begbie, Prospa New Zealand’s managing director, believes that SMEs are recalibrating for more demand ahead and expects the country’s already battle-hardened small businesses to handle any rough patches in the economy. “Small business owners know it's a changing economic environment, and the Kiwi small businesses that continue to navigate it are savvy and intelligent,” says Begbie. “It's really encouraging to see the majority of small business owners are optimistic about their overall business health and growth potential.” Begbie did a ‘pulse of the SME economy’ tour of the South Island over the New Year break, speaking to business owners about the upcoming year. She found that they were upbeat.

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“It’s really encouraging to see the majority of small business owners are optimistic about their overall business health and growth potential”

Adrienne Begbie, Prospa New Zealand

In fact, their main concern was how to find employees to keep up with demand. “Staffing was the key concern across the board – with the expectation that it was only going to get busier as businesses continued to grow,” Begbie says. A recent survey commissioned by Prospa found that New Zealand’s small businesses were feeling positive about the future as they headed into the Christmas holiday period last year – with 43% of Kiwi SMEs expecting their business revenue to increase over the next 12 months – echoing Begbie’s anecdotal feedback.

One part of this is a border-opening story, with tourism operators experiencing a stronger-than-expected return of travellers over the summer and immigration roaring back to 90% of pre-COVID levels at the end of 2022, according to StatsNZ data. The operator of fast-food chains KFC, Carl’s Jr., Pizza Hut and Taco Bell reported that New Zealand sales were up more than 10% year-on-year in the quarter to December, for example. Some sectors outside tourism and hospitality are also seeing a lift. Local business travel fared better than expected during the usual seasonal low period from late December through to mid-January, according to the operator of Booking.com for Business. And while electronic card spending fell in December for the first time in nine months on a seasonally adjusted basis, the Equifax Quarterly Consumer Credit Demand Index for the quarter ending December shows a continuing stable trend overall and an increase in credit card demand of 25.4%.

Demand for credit is even higher at Prospa – a 60% lift in the year to December was partly attributable to the introduction of its Business Line of Credit product last July and the corresponding surge in business. The top sectors seeking capital to run their businesses are the construction and building trades and the hospitality, retail and professional services sectors. “Gaps could include paying staff wages, urgent stock purchases, late-paying customers, [or] covering supplier invoices,” says Begbie. “As businesses continue to get busier, they need funding to help that growth.” Managing choppier conditions brought about by cost of living pressures impacting discretionary spend, or higher rates affecting housing demand, requires battening down the hatches and trimming the sails. Done right, the ship moves along at a much faster pace.

“Most start-ups fail as they run out of cash, not because it was a bad idea”

Adrienne Begbie, Prospa New Zealand

“We have pre-emptively revised our commercial credit risk assessment policies in line with these changing conditions – we have a responsibility to our customers to balance risk and customer need,” says Begbie. The Prospa Business Line of Credit product is particularly well suited to the brisker winds buffeting the economy this year. “The Prospa Business Line of Credit is a relatively new product in New Zealand and as the only true revolving line of credit is perfect to help businesses roll with changes and have funding available.”

Banks that have talked themselves into fearing what lies ahead tend to cut the provision of credit when businesses need it most, taking away the umbrella just as it starts raining. But non-bank lending to businesses is rising steadily.

small business owners getting financial assistance

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A data-driven approach

Business confidence rises as new year begins

-70.2

-52.0

-25.6

-15.8

+18.2 points

+9.8 points

Business confidence

Own activity outlook

Dec 2022

Jan 2023

Source: ANZ New Zealand Business Outlook, January 2023

Prospa’s positive approach based on granular market information is one advantage it has over banks that may not have their ears as close to ground in the SME market. But there are many other attractions. “Prospa offers a faster, easier approach to business lending,” says Begbie. All Prospa products in New Zealand – the Prospa Small Business Loan, Prospa Business Loan Plus and Prospa Business Line of Credit – can be applied for in under 10 minutes online or over the phone. Begbie also cites flexibility of approach, support from specialists and the confidence of joining more than 40,000 businesses helped over Prospa’s 10 years in Australia and four years in New Zealand as reasons to count on Prospa. As a data-driven business, Prospa uses real-time data from its customers and distribution partners to respond, revise and plan accordingly. The online lender enhanced its core Credit Decision Engine technology during the pandemic, which has enabled it to make informed decisions on who to lend to, while adapting its processes to better read any unexpected future circumstances as its risk appetites evolve.

No upfront asset security is required to access Prospa funding of up to $150,000, with anything above that amount requiring a charge over the applying business entity on the Personal Property Securities Register. A direct customer can make an application over the phone or a web enquiry via the Prospa website, and someone will call within 24 hours to discuss the situation. Advisers who assess Prospa as a suitable option and submit an application via the Prospa Partner Portal or by email will receive a call within two hours to discuss the customer’s needs. Speed-to-decision can be quick – and funding available sometimes the same day or within 24 hours. “Using technology drives faster decision-making and can give the business confidence to proceed with their plans,” says Begbie. “We strive to make every interaction a positive one, even if the application is declined. A fast response means that our customers can move on. It gives them their time back, and they can move on with other options.”

Begbie has seen what success looks like for SMEs and knows there are many ways to achieve it. Her latest informal business sentiment tiki tour has only reinforced that view, but she says there are common elements across most SMEs that flourish over the long term. The first is to build a business plan. “Address the problem you’re solving for your customers, who those customers are, what is the current market, what’s the solution. Do you need additional staff? What is your timeline, and what are your goals?” Another is to build a cash flow forecast. “Most start-ups fail as they run out of cash, not because it was a bad idea,” she says. Also, build a supportive team and resolve problems early. “If your idea isn’t working, take a step back to look at it objectively, recognise the problem and take action to find a resolution.” When that problem is credit, looking to Prospa, the small business specialist, could make the difference in a tough situation. At the very least, it will start a constructive conversation. And for advisers, Prospa is running End of Financial Year offers to support them as they look to grow their own businesses in 2023. Reach out to your local BDM for more details. After all, the Year of the Water Rabbit is predicted to be a year of hope.

A year of hope

$1bn

$2bn

$3bn

$4bn

$5bn

$6bn

$7bn

$8bn

$9bn

$10bn

Non-bank lending to business shows YEAR-ON-Year growth

2021

2022

Source: Reserve Bank of New Zealand sector lending (C5) data, January 2023

July

+12.1%

$7.08bn

$7.94bn

Aug

+12.4%

$7.11bn

$7.99bn

Sept

+14.8%

$7.28bn

$8.36bn

Oct

+15.6%

$7.28bn

$8.42bn

Nov

+15.3%

$7.37bn

$8.50bn

Dec

+16.0%

$7.45bn

$8.64bn

$1bn

$2bn

$3bn

$4bn

$5bn

$6bn

$7bn

$8bn

$9bn

$10bn

Non-bank lending to business shows YEAR-ON-Year growth

2021

2022

Source: Reserve Bank of New Zealand sector lending (C5) data, January 2023

July

+12.1%

Aug

+12.4%

Sept

+14.8%

Oct

+15.6%

Nov

+15.3%

Dec

+16.0%

$7.08bn

$7.94bn

$7.11bn

$7.99bn

$7.28bn

$8.36bn

$7.28bn

$8.42bn

$7.37bn

$8.50bn

$7.45bn

$8.64bn

1 This survey was conducted online by Clarity Insight from 14 to 21 November 2022 among a sample of 514 small business owners in New Zealand with one to 49 employees.

2 Standard credit assessment criteria, fees, terms, and conditions apply. Visit us at prospa.co.nz/partner-promo or call 0800 005 834 to find out more.