Last year was tumultuous for a lot of small businesses in New Zealand. Alongside economic trends such as higher inflation and interest rates, the country dealt with catastrophic floods and a change in government.

However, that macro perspective can be misleading, because just as not every business succeeds during a boom, not every business stalls when times are tougher.

“If you listen to the news, it might say the economy is not growing,” says Huia Manuel, Senior Business Development Manager Prospa NZ. “However, 40% of our business customers got in touch with us to grow their business.”

This attitude will be important in 2024 if business owners want to expand, because the opportunities will certainly be out there.

Here’s how you can help your small business clients prepare their business for the rest of the year.

Encourage clients to be ready for changes

“The last government restricted claiming back interest for investment properties. The expectation is that the government will repeal that,” says Huia.

This, combined with the Reserve Bank easing loan-to-value ratio restrictions last year, means businesses should have more flexibility to pursue financial opportunities.

Consider talking to your clients about how they could make the most of this and other potential changes.

Huia points to research that found a sizable majority of the clients of financial planners (68%) were highly satisfied with their wealth while only 33% of those without a planner said the same.

“[Business owners should] absolutely speak to a financial professional about their goals, because they’re on point about everything that’s changing,” she says.

“Just one example: regulatory changes from the government don’t happen overnight. Financial institutions have to apply their lens as to how they will work within that regulation. If businesses get the work done with a professional early, when those changes happen, they’ll be ready to maximise their outcomes.”

Navigating a tougher environment

During the Christmas period, many New Zealanders adjusted to higher cost-of-living pressures by reducing the number of gifts or crafting their own. A similar approach has been taken up by smart businesses, and that’s an area brokers can suggest business owners concentrate on.

“Making their money work harder is about leveraging technology and the people around them,” says Huia. “For example, rather than hiring a new staff member, many businesses are cross-skilling existing employees.”

The right kind of business lending

Huia is keen for people to know that New Zealanders can now access fit-for-purpose loans, rather than having to rely on more old-fashioned methods of business lending. While the initial numbers might seem off, they can be deceiving.

“Traditionally people would have to use their homes and mortgages,” she says. “If you ask a fit-for-purpose lender such as Prospa about the rates on its business loans, they may seem too high – and they are if someone had a 30-year loan term. However, that’s not what we’re talking about.”

The way lenders like Prospa approach loans is different – typically customers are looking at a fixed-rate loan that will last three to 36 months. These are designed to help owners achieve specific business goals.
This distinction is something Partners can help their clients to understand, to alleviate any possible financial stress.

“Businesses should be looking at the cost of the opportunity,” says Huia. “If a loan worth tens of thousands of dollars is going to allow them to hire another staff member who will help them double their turnover, that loan is very valuable.

“Whereas if they’re tying up a business loan in a 20 to 30 year mortgage on their property, what is that doing to their budget and business?”

The lesson, says Huia, is to not just look at initial rates or costs, create a business plan and see if the costs are worth it.

Business owner wellbeing

Some business owners may look at everything they have to do in a new year and feel daunted. That’s why perhaps the most important tip is to not let financial pressures become overwhelming.

“[Suggest clients] take time out to fill their own bucket,” says Huia. “That can mean creating boundaries or switching off [after a certain time of day].”

That way, they can be better placed to face both challenges and opportunities when they arise.

Help guide your clients prepare for the rest of 2024 with these 7 financial tips.

New Zealand had a tumultuous 2023, with everything from floods to a change in government. In 2024 businesses are asking what’s next. These tips could help you prepare.

  1. Last year the Reserve Bank eased loan-to-value ratio restrictions, giving small businesses more flexibility to pursue financial opportunities. Talk to your financial advisor to learn what they are, when they come into effect and how they could work for you.
  2. The economy is challenging, but don’t assume that means no one is succeeding. Trust your numbers over national or international measurements.
  3. The adage “work smarter not harder” is more important than ever. Just as your household might be eliminating spending it can do without, look at where your business could do likewise.
  4. Invest in skills and knowledge. Cross-skilling yourself and staff can be an effective way to reduce hiring burdens when the market is tough.
  5. Understand your own cash flow by leveraging technology, such as Xero or QuickBooks Online.
  6. In a challenging economy it can feel like you’re on your own. Reach out to advisers, government agencies and your network. Relationships can have exponential benefits.
  7. Finally, look after your own wellbeing. In the end, a business is just a business, and you’ll be a better manager of finances if you have a steady mindset.

Have an idea that could grow your business in 2024? Ask your adviser how a Prospa funding solution could help you get that idea off the ground.