How to compare business loans in New Zealand

Comparing business loans is a bit like comparing produce at a market where every stall sells by a different measure. One prices by the kilo, one by the bunch, one by the box, and one gives you a free bag if you buy two. You can compare them, but only once you convert everything into the same unit. For business loans, that unit is dollars.

Why isn’t the interest rate enough?

A rate tells you the price of the money, but not the cost of the loan. Two offers at similar pricing can end up far apart once you add:

• establishment, broker, legal and valuation fees;
• monthly or annual account fees;
• fees deducted from the advance, which shrink the money you receive;
• the length of the term, because longer usually means more paid overall;
• balloon or lump-sum payments at the end; and
• early repayment or break costs if your plans change.

Business lending also sits mostly outside New Zealand’s consumer credit rules. The FMA explains that a consumer credit contract is one where an individual borrows mainly for personal, domestic or household purposes. Loans mainly for business fall outside that, so the protections people associate with personal loans may not apply. That makes your own comparison more important, not less.

What are the six numbers to compare?

Ask every lender for enough information to fill in this table. If they won’t give you a figure, that’s a finding in itself.

Measure	How to work it out	Why it matters
Money in your hand	Amount borrowed minus any fees deducted at settlement	What you can actually spend
Total cost of finance	Total repayments minus amount borrowed, plus fees not already included	The real price of the loan
Cost per $1,000 borrowed	Total cost divided by amount, times 1,000	Compares different-sized offers fairly
Average monthly outlay	Total repayments and ongoing fees divided by the term in months	Tests cash flow
Exit cost	Early repayment or break fee, in dollars, at a realistic point	Prices your flexibility
Security and guarantees	What’s at risk if things go wrong	Prices your downside

Our offer comparer calculates the first five for up to three offers and turns the sixth into risk flags. The total cost of finance page walks through the arithmetic by hand.

How do you compare offers with different terms?

This is where shoppers most often go wrong. A 12-month loan and a 36-month loan aren’t directly comparable on total cost, because the longer loan keeps the money working for longer. Three ways to handle it:

1. Compare cost per $1,000 alongside monthly outlay. The short loan may cost less in total but demand much more each month.
2. Ask each lender to quote the same term. If you need $100,000 for two years, ask everyone for a two-year offer.
3. Compare against your actual plan. If you expect to repay in 12 months whichever loan you pick, compare the total cost of exiting at month 12 under each offer, including early repayment fees.

How should you weigh cost against flexibility and risk?

Cheapest isn’t always best. Picture three offers:

• Offer A is cheapest, but needs a first mortgage over your home and personal guarantees from both directors and their trust.
• Offer B costs a little more, uses security over business assets only, and has no early repayment fee.
• Offer C is the dearest, unsecured, with weekly repayments.

If you’re confident and the property risk doesn’t bother you, A may win. If you expect to refinance within a year or want to keep your home out of the business, B may be worth the extra. If you have no property and need the money tomorrow, C might be the only realistic choice. Our offer-checking page helps you read the conditions behind each option.

Comparing is easier with genuine offers in hand. If you’d like one tailored to your business, you can start a 60-second enquiry with no credit check.

How do you shop without wrecking your credit file?

New Zealand’s consumer protection guidance says that applying for several sources of credit in a short time can count against your credit score. So:

• Talk before you apply. Ask lenders about appetite, likely structure and fees without lodging a formal application.
• Ask what each step means. “Is this an application? Will it be recorded as an enquiry?”
• Apply once, well. A complete, accurate application to the lender most likely to approve beats five rushed ones.

Read more in does shopping around hurt your credit score?

What’s a simple comparison routine?

1. Write down what you need the money for, how much, and when you expect to repay.
2. Decide what security you’re willing to offer, and what you’re not.
3. Have short conversations with two or three suitable lenders or one trusted broker.
4. Ask each for a written indicative offer with every fee and the total repayable.
5. Run the offers through the comparer and list the risk flags.
6. Go back to your preferred lender with any points to negotiate, using our negotiation tips.
7. Get legal advice on the final documents, particularly for property security or guarantees.

What does a good comparison look like in practice?

Illustrative example. A Tauranga electrical contractor needs $90,000 to fund materials for a large contract. Offer one is a two-year bank term loan with a $1,500 establishment fee and security over business assets. Offer two is a one-year non-bank loan with a $3,600 fee deducted from the advance, unsecured but with director guarantees. Offer three is a twelve-month private loan secured by a caveat over the owner’s rental. On cost per $1,000, the bank wins clearly. On money in hand, the non-bank loan delivers $3,600 less. On flexibility, the private loan has the smallest exit fee. The contractor picks the bank offer, but only after confirming it can settle before the contract’s materials deadline.

Ready to compare a real offer?

If you’d like a properly matched offer to put alongside the ones you’ve already got, tell us what you need. There’s no credit check to enquire, and we don’t send your enquiry to a crowd of lenders; a real person reads it and calls you. Please be accurate about the amount, purpose and timing, so the offer you get is one worth comparing. See if you qualify.