Prospa’s flexible revolving line of credit wins fans

IN Partnership with

It’s not the easy-street post-pandemic economy that SMEs dreamed of out there, and small businesses need flexible funding quickly. Luckily, one lender has the ideal solution

SMALL BUSINESSES have had it tough over the last two years, and continuing economic winds look set to add further pressure to cash flow. “For many hard-working small-business owners, accessing funds when they need it is one of the greatest challenges,” says Prospa New Zealand managing director Adrienne Begbie. When market research by the small-business finance specialist found that around 24% of Kiwi businesses are declined lending products, Begbie realised there was a problem – and an opportunity.

Prospa is New Zealand’s small-business online lending specialist, providing market-leading capital products and solutions to help Kiwi small businesses grow and prosper. Established in 2018, Prospa ensures applications are simple and funds can be accessed within 24 hours. Its cash-flow products and services allow small businesses to grow and take advantage of opportunities to run their businesses or help them pay for goods and services.

Find out more

“[Given] the time it takes to apply for a credit product, and the possibility of being declined, it may not be ideal for a business to turn to traditional lenders when capital is required fast”

Adrienne Begbie, Prospa New Zealand

“If you consider the time it takes to apply for a credit product, and the possibility of being declined, it may not be ideal for a business to turn to traditional lenders when capital is required fast,” she says. The result is Prospa’s new line of credit product launched in early July to provide SMEs with flexible funds that can be accessed at any time, to use and reuse as much or as little as clients need.

Revolving line of credit Begbie calls Prospa’s revolving line of credit the perfect solution for small businesses seeking ongoing access to funds that can be drawn down to use, and reuse, while only paying interest on the funds used. “The line of credit will allow business owners to cover unexpected cash flow gaps, such as paying staff, buying stock, or managing late payments,” she says. The timing of the launch is designed to support those SMEs that have slogged it out through the pandemic and are now facing temporary cash flow issues as they brace for the challenges of inflation and consumer uncertainty in a rising interest-rate environment.

A Prospa survey conducted earlier this year showed that two in three small businesses value flexibility the most, believing that a flexible funding product should provide greater control over cash flow. This is sometimes difficult to achieve through mainstream channels, not to mention slow. “Traditionally, SMEs would turn to lenders that have addressed their personal finances, only to be faced with an extensive application process,” says Begbie. That’s why there has been good demand so far for its line of credit product, even though it was only launched in July. “We’ve had a positive response from Kiwi businesses and advisers,” Begbie says. “The flexibility of the product, along with the peace of mind it provides small businesses, is winning over the hearts of many. It allows small businesses to focus on doing what they love and not worry about cash flow.” Common uses for a line of credit are when business owners need to fill temporary cash flow gaps so they can, for example, pay wages or rent, cover invoices, or buy urgent stock. The potential for Prospa’s new product can’t be understated. SMEs are the lifeblood of the New Zealand economy, with around 97% of businesses employing fewer than 20 people. They account for 28% of employment and contribute over a quarter of New Zealand’s GDP. “For small businesses, being able to access cash flow is their most important factor [allowing them] to take on opportunities, maintain profits, and grow their businesses,” says Begbie.

The importance of advisers The line of credit is part of a stable of three Prospa funding products that financial advisers can offer customers, the other two being a small business loan product and the Prospa Plus Business Loan. Advisers can either guide their clients during the application process or refer them directly to Prospa. “We help our partners grow and diversify their businesses, which helps build stickier relationships with their existing clients,” says Begbie.

“The flexibility of the [line of credit] product, along with the peace of mind it provides small businesses, is winning over the hearts of many”

Adrienne Begbie, Prospa New Zealand

Prospa supports accredited brokers and advisers with access to a range of complimentary white-label marketing resources to help grow their businesses within their own databases; it also provides access to an online Partner Portal. “We encourage advisers to educate their clients on the alternative lenders available within the market to address their funding needs fast and take hold of opportunities for growth.” Business owners are always in need of good advice, but there is a sense of urgency now as many are looking for expert guidance to help them through the current environment, says Begbie.

“Advisers, brokers, or accountants are always a great point of contact to assess a business and help business owners make an educated decision that will allow them to take control and feel more confident,” she says. “Our partners should start reaching out to business owners within their customer base to help them consider ways to sustain and grow their businesses.” Powering through 2022 “Now is a great time to build financial confidence and stability,” says Begbie. “A $10,000 investment may have the potential to give you a return that is three to five times greater.” With the economy at a crucial point as pent-up demand grinds against supply-chain issues and staff shortages, the potential for more sustainable business growth is palpable. SMEs have shown they can be resilient in the face of unprecedented challenges, and many are keen to see that toughness reflected in their bottom lines. Non-bank lending to the business sector has accelerated since the start of the year, and Begbie says there is high demand for funds to power through the rest of 2022 and beyond. This is evidence of the increasingly important safety-valve role that non-banks are playing in the lending sector as traditional banks become more constrained in their criteria. Indeed, the very reason that Prospa was established was to service business owners who have historically been underserved by financial institutions, says Begbie. SMEs are fighting it out in the tougher conditions, with some sectors, such as building and hospitality, grabbing headlines, but Begbie says there is broad-based credit demand from across all industries and sectors. “Business owners are determined to push on and build resilience,” she says.

News

Mortgage Industry

Best in Mortgage

Specialty

Resources

RSS

Companies

People

Newsletter

About Us

Authors

Conditions of Use

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources

Companies

People

Newsletter

About us

Authors

Conditions of Use

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources

Companies

People

Newsletter

About us

Authors

Conditions of Use

RSS

Year-on-year change in value of non-bank lending to business sector

Jun 2021

Jun 2022

Change

$7.00bn

$7.78bn

+11.2%

MAY 2021

MAY 2022

Change

$6.71bn

$7.75bn

+15.4%

APR 2021

APR 2022

Change

$6.79bn

$7.71bn

+13.6%

MAR 2021

MAR 2022

Change

$6.78bn

$7.66bn

+11.4%

FEB 2021

FEB 2022

Change

$6.73bn

$7.46bn

+10.9%

JAn 2021

Jan 2022

Change

$6.74bn

$7.47bn

10.8%

Source: Reserve Bank of New Zealand sector lending – C5 data, July 2022

Year-on-year change in business credit demand by sector – June 2022

Sector

Year-on-year change

Construction

+10%

Tourism

+13%

Agriculture

+24%

Retail trade

-6%

Hospitality

-21%

Wholesale trade

-2%

Mining

+5%

Education

+6%

Overall

-13%

Source: Centrix June 2022 Credit Indicator and Economic Forecast Report