Capital is what keeps your business moving, growing and meeting its financial goals.

But accessing the lending and lines of credit needed to source this capital is increasingly difficult in the current volatile and unpredictable market.

35% of NZ small business owners say access to capital is their biggest roadblock, according to recent research by Westpac.

The challenge of funding your SME

With the main high-street banks reluctant to lend to small and medium-sized businesses, it’s a challenge to build up the capital that’s required to fund your business plans.

The key problem is one of risk. Small businesses, especially startups and new businesses, present more of a risk to lenders than large, established companies. Your revenue, cashflow and payment history can be unpredictable. That’s not good news for meeting loan repayments, or paying back the balance of a new business credit card.

To make your business a more attractive proposition to lenders, it’s important to reduce your risk profile and present a more stable financial position.

Here are four key ways to improve your chances of accessing funding and credit:

1. Focus on improving your business credit score

Your business credit score is a fundamental indicator of your risk level. Low-risk businesses are far more likely to make successful applications for loans or lines of credit.

Pay your suppliers early and clear outstanding disputes immediately to raise your business credit rating. This acts as a strong marker of debt reliability to any potential lenders.

2. Improve the size of your turnover

Turnover is a major indicator when pre-approving the eligibility of a loan applicant. Most lenders will have a turnover cut-off point that your business must exceed to be considered for funding.

Focus on expanding your revenue through sales and client expansion. This shows lenders that you can generate enough cashflow to service loans and meet the repayments.

3. Switch to digital accounting

Lenders will want to see and review your financials. This is far easier to achieve with digital, cloud-based accounting software that integrates with lending platforms.

Adopt cloud software to generate clear profit-and-loss statements, cashflow reports and revenue forecasts, giving lenders total visibility and confidence in your financial health.

4. Avoid maxing out any lines of credit

Banks and lenders want to see evidence that you’re sensible with your available credit.

Maintain low credit utilisation ratios on your existing credit facilities. This shows lenders that you manage credit responsibly and don’t max out your available funds.

Having an optimal level of capital in the business is a must. If you’re struggling to raise funds, come and talk to our team.

We’ll help you review your business credit score, risk history and payment profile and take the steps needed to make you a more attractive proposition to lenders.