The short answer
There is no single business loan interest rate in New Zealand. Each lender prices each loan on its view of the risk and its own cost of funds, so two businesses borrowing the same amount can be offered very different terms.
The rate is also only part of the cost. To compare offers properly, compare the total amount you will repay over a realistic timeline, including fees and what happens if repayment takes longer than planned.
What sets a business loan interest rate
- The lender's cost of funds. Bank lending rates tend to move with the Official Cash Rate, which the Reserve Bank's Monetary Policy Committee reviews eight times a year. Non-bank and private lenders fund themselves differently, so their pricing does not always move in step.
- Security. A loan secured by a registered mortgage over property is priced differently from an unsecured loan, and a first mortgage differently from a second mortgage that sits behind an existing lender.
- The business and its owners. Trading history, financial statements, credit history and any IRD arrears all shape the lender's view of risk.
- Purpose, amount and term. What the money is for, how much you borrow and how long you need it.
- The exit. How the loan will be repaid: business cash flow, a property sale, a refinance or a large payment the business is waiting on.
- Speed and flexibility. A lender that funds quickly, works with limited paperwork or lends where banks will not is pricing that risk and convenience into its offer.
Bank, non-bank and private lenders
If your business fits a bank's criteria and you have time for a full credit process, a bank will often be the cheapest option, and it is worth asking yours first. Non-bank and private lenders usually cost more, but they can say yes where a bank will not, or fund in days rather than weeks. Common reasons New Zealand businesses look beyond the bank include a short trading history, a recent loss, IRD debt, a credit default, or a deadline a bank process cannot meet.
The honest comparison is not one lender's rate against another's. It is the cost of the loan you can actually get, in the time you actually have, against the cost of going without: a missed purchase, IRD penalties and interest, or a supplier relationship lost. The cost of business loan delays page and calculator help you put a number on waiting.
Secured or unsecured
Unsecured business loans can be quick to arrange for smaller amounts, but they lean heavily on the business's trading and credit record and commonly ask directors for personal guarantees. Property-secured loans can reach larger amounts and focus on the property and the exit, but the property is at risk if the loan is not repaid, so the repayment plan matters.
Neither is better in every case. Weigh the amount you need, how long you need it for and what you are comfortable offering as security.
The costs outside the headline rate
Ask every lender for a written list of every cost, and check how each one is worked out:
- establishment, application or documentation fees, and whether they are paid upfront or added to the loan
- legal costs, both the lender's and your own
- line, facility or account-keeping fees
- how interest is charged: daily or monthly, paid as you go or added to the balance
- early repayment, break or minimum-interest costs if you repay sooner than planned
- default interest and fees if a payment is missed or the loan runs past its end date
- extension, variation or review fees if you need more time
- any broker or adviser fee, and anything the lender pays them for introducing you
A lower rate with heavy fees and a strict end date can cost more than a higher rate with fewer fees and room to repay early or take a little longer.
Business loans and consumer credit law
The Credit Contracts and Consumer Finance Act gives strong protections, including set disclosure and affordability checks, to consumer credit contracts: loans used wholly or predominantly for personal, domestic or household purposes. A loan used mainly for a business purpose is generally not a consumer credit contract, so many of those consumer rules will not apply.
That makes it more important to read the whole contract, ask your questions in writing and get independent legal advice before you sign.
How to compare business loan offers
- Line them up on the same basis. The same amount, the same expected term and the same purpose.
- Ask for the total amount payable if you repay on time, earlier than planned and later than planned.
- Check the payment structure. Principal and interest, interest-only, or a period with no scheduled payments. Each suits a different cash flow.
- Check the security. Which property, first or second mortgage, and whether personal guarantees are required.
- Check the conditions before settlement. What still has to happen before the money arrives, and how long that realistically takes.
- Check the end of the term. What happens if your sale or refinance takes longer than expected.
- Get advice. Ask your accountant how the loan affects tax and cash flow, and a lawyer to review the contract.
Where HomeSec fits
HomeSec is a direct, privately funded New Zealand lender. We lend $20,000 to $1,000,000 for genuine business purposes on open-term facilities, secured by suitable New Zealand property.
We do not publish a standard rate, because pricing depends on the amount, the property security, the purpose, the exit and the full scenario. The interest, fees and conditions that apply to you are set out in writing before you proceed, so you can compare them with any other offer.
Funding may be possible in as little as 24 hours once assessment, documents, security, legal work and settlement line up, and approved facilities may offer up to six months with no scheduled payments. Interest still accrues during that time, and approval is never guaranteed.
See how HomeSec small business loans, business loans and second mortgages work.
Common questions
Is a lower interest rate always cheaper?
No. Fees, how interest is calculated, early repayment costs and what happens if you need more time can all outweigh a small difference in rate. Compare the total amount payable over a realistic timeline.
Does the Official Cash Rate affect business loan rates?
Bank lending rates often move when the Official Cash Rate changes, although banks also price for risk, their own costs and competition, and a fixed rate does not change until its fixed term ends. Non-bank and private lenders fund themselves differently, so their pricing may not follow the OCR closely.
Is interest on a business loan tax deductible?
Often, but it depends on how the borrowed money is used rather than what secures the loan. Interest on money used to earn business income is generally deductible. Ask your accountant how the rules apply to your business.
What do I need to get a price from HomeSec?
The amount, what it is for, when you need it, the property address and ownership, an estimated value, current mortgage balances and how you plan to repay. No valuations or cashflow records are needed to start an enquiry.