The past few years have been challenging for New Zealand small business owners.

After years of belt-tightening, some businesses are making plans and searching for additional capital to bring their growth plans to life. But applying for funding to finance these growth plans is still not always plain sailing.

Five key challenges you’ll face when sourcing capital

1. Banks remaining risk-averse

While interest rates are currently low, the main New Zealand banks remain highly conservative when it comes to lending to the small business market. Lenders are likely to prioritise ‘The 4 Cs’ of Character, Capability, Capacity and Collateral and will want to see significant tangible security and positive financial forecasts for your business before they will approve any lending.

2. The re-emerging pressures of inflation

Despite earlier rate cuts, inflation is on the rise, with CPI inflation reaching 3.1% in figures for December 2025. This means the cost of servicing new debt can shift unexpectedly, forcing you to build larger interest-rate buffers into your long-term growth plans. Higher inflation also creates cashflow pressures as your supplier costs and expenses begin to rise.

3. The high cost of investing in AI and digitisation

To scale effectively in 2026 means investing heavily in AI technology and digital automation to keep your competitive edge. However, sourcing funding for these intangible technology assets can be difficult. Traditional lenders often prefer physical collateral – assets like property or machinery – over digital infrastructure, making it a challenge to source the funds needed for digitisation. Exploring government funding is one option to overcome this funding gap.

4. Rising costs putting pressure on your capital

Increases in fuel and utilities costs, insurance premiums and the April 2026 KiwiSaver contribution hike are tightening your cash reserves. Rising costs are squeezing your margins, reducing the profits you have available to reinvest. This has the potential to make you evermore dependent on increasingly expensive external lines of credit.

5. Pushback against the concept of ‘anti-scaling’

There’s a growing trend toward 'strategic smallness' among NZ business owners, with many focusing on smaller high-value niche markets rather than growing at pace. But many NZ venture and equity backers still prefer traditional, rapid-scale models, making it harder to access lending and investment for anti-scale, strategically small business plans.

Opening up your funding options as a small business

Overcoming these funding challenges takes sensible planning and a detailed awareness of your own financial and capital position. If you’re ready to grow, or need to invest in a new niche market, come and talk to our team about your funding strategy.

Micro, small and medium-sized enterprises (MSMEs) make up over 90% of all firms and, on average, account for 70% of total employment and 50% of GDP worldwide.

But MSMES are finding it increasingly difficult to access funding. According to recent figures from the International Finance Corporation, (part of World Bank Group) the MSME finance gap in emerging markets and developing economies (EMDEs) now stands at $5.7 trillion.

The key routes to funding

For your micro, small or medium-sized business to thrive, it’s important to have easy access to funding. But what are the usual routes to take when looking for additional funding?

For many business owners, the starting point has traditionally been their bank. Overdrafts, business loans and access to credit cards open up a route to extra capital. But with the major banks currently reluctant to lend to MSMEs, the lending market has diversified.

Private finance specialists and fintech platforms offer ways to borrow. But despite the proliferation of alternative lenders, it’s still vital to be an attractive proposition for lenders.

How to make your business more attractive to lenders

Lenders don’t want to lend to a risky prospect. As a business, it’s critical that you have a positive credit profile, good sales revenues and the available cashflow to repay the loan.

To present your business as a more attractive prospect, try these three key approaches to good recordkeeping, cashflow administration and debt management.

Keep accurate, real-time financials: Using cloud accounting software, like Xero, QuickBooks or MYOB, helps you provide potential lenders with the financial data they need. Having up-to-date balance sheets and cashflow statements gives the lender a clear overview of your financial performance and reduces the perceived risk of lending.

Demonstrate consistent cashflow coverage: Focus on achieving a strong debt service coverage ratio (DSCR). If you can show consistent, recurring revenue that comfortably covers the company’s existing and proposed debt obligations, this reassures lenders of your ability to repay.

Strengthen your business credit scores: Regularly monitor and improve your business credit score by paying suppliers early and correcting reporting errors. A high score signals you’re a low risk to lenders and eases the path to lender approvals.

Opening up the best routes to small business lending

If you’re eager to scale but are facing resistance from traditional lenders, come and talk to us. Our team can help you build a workable funding strategy and recommended approach to best lenders.