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If you're looking at starting or growing a business, organising the right finance is vital. If you need funding, you have the option of equity or debt finance. Here are some key things that you need to consider when deciding what type of finance best suits you.
The first thing you need to know is how much money you'll need. You can get an idea of this through a number of different methods:
A financial plan is an important supporting document if you want to apply for a bank loan or other types of debt and equity finance. Our guide to writing a financial plan is a great place to start as it will give you an idea of your cash flow and how much you need to borrow. To reduce financial stress, if it looks like you need to borrow a larger amount, you may want to consider ideas that can save you more money or, if you can, keep working your existing job for extra income.
Equity finance is investing either your own or someone else's money into your business. The key difference between debt finance and equity finance is that the investor becomes a part owner of your business and shares any profit the business makes.
Debt finance is borrowed money that you pay back with interest within an agreed time. The most common types include:
New businesses may find it difficult to secure debt finance without accurate financial records or projections and a comprehensive business plan.
Before you go down the route of borrowing money, you may be eligible for some assistance from the government, provided you have a viable business idea. Government agencies offer a range of support, from mentoring and grants, to capability and skills building - to help small businesses succeed. Visit business.govt.co.nz for more information on government support for small businesses.
For additional guidance on other finance options, an accountant can help you assess your prospective financial position and ensure you've thought through all potential income and expenses.
You don't have to go it alone - there are plenty of places to turn for guidance. If you're looking for how to source advice or support for your start-up, visit business.govt.nz for information on business advisors, business groups, networks and mentors who may be able to help.
If you need help to figure out what type of business lending and level of funding you need, talk with your accountant or get in touch with us and talk to someone from our specialist team.
Every business is different and has unique banking needs, discover your options.
This page is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and should not be relied on. This information has been prepared without considering your objectives, financial situation or needs. We recommend you seek independent professional advice and contact Inland Revenue before acting on this information.