Details You Need To Know About Business Loans in New Zealand For Sole Traders

You might not believe that around 50% of small businesses in New Zealand are sole traders. Being a sole trader, it is common to face cash flow issues if invoices get delayed or your business cannot generate sufficient income. But overcoming these issues is not complex as there are different private business loans for sole traders.

But what is a sole trader business loan? Well, it is a kind of loan formed to assist small businesses so they can grow their business and maintain healthy day-to-day cash flow. Apart from this, sole traders can utilize the fund to launch new products, execute necessary marketing campaigns, upgrade existing capital assets, and the list goes on. If you apply for sole trader business finance in NZ, you can access a higher amount directly into your business bank account.

So, if you want to know more about business loans in New Zealand for sole traders, you should read this article. Here we have provided all you need to know about this kind of loan so that you can take out this finance easily and reap all the benefits to make your business flourish. Therefore, without further delay, start going through the segments below.

Various reasons to take out a sole trader loan

As you might understand, sole traders opt for this business finance in NZ for various reasons. You can read the below reasons to determine why this kind of loan is advantageous.

• Meet your businesses working capital needs.
• Easily maintain a healthy cash flow.
• Rent, buy, and renovate your office premises and infrastructure.
• The private business loan helps you purchase new equipment to enhance productivity.
• Purchase stock or hire new staff.
• When you have cash flow issues, you can pay all the bills and overhead costs using the funding.

Types of a sole trader loan

There are two types of business loans in New Zealand available to sole proprietors. They are as follows.

• Secured Loan

As the name suggests, in this kind of business loan, sole traders need to offer some security for the funding to the lender. In simple words, you need to submit your collateral or assets like your property, vehicle, or business machinery and equipment as security for the loan amount you borrow. The lender of secured business loans asks for this so that they can get their money back if you default the loan or fail to repay.

• Unsecured Loan

Contrary to secured loans, when you take out unsecured business finance in NZ, you do not need to submit any collateral to the lender. Instead, you should meet some eligibility requirements and have a good credit history to secure the amount.

Eligibility criteria for a sole trader business loan

As a sole trader, you can access quick and hassle-free financing for your business if you fulfil some fundamental eligibility guidelines. Read the below eligibility requirements for a sole trader business loan.

• Need to be a permanent resident of New Zealand.
• Own property in New Zealand
• Have a registered NZBN .
• You should have a good credit history and score if applying for unsecured loans.

Documents required for a sole trader loan

Like other business loans, you should offer certain documents when applying for a sole trader loan. So, below, we have listed down a list of some necessary documents for taking out a proprietorship loan so that you can gather all these before submitting the loan application.

• Your financial statements.
• Your profit and loss details.
• Your credit report.

Apart from this, depending on the lender you select, the documents might vary. As a result, the lender might ask for other documents as well.

Features and benefits of a sole trader loan

By reading the above segments, you can more or less understand the importance of a sole trader private business loan. But to determine more why it is beneficial, you can go through the below features and benefits of this business finance.

• Hassle-free online loan application and submission
• Straightforward eligibility criteria
• Availability of unsecured loan without submitting any collateral
• Get access to a lump sum amount of working capital
• Attractive and competitive interest rates
• Flexible repayment terms and conditions
• Transparent and quick loan disbursements
• Free of any hidden charges

The challenges of taking out a sole trader business loan

Sole traders are responsible for any business loans they owe, some private lenders require bank and financial statements to approve small business loans in New Zealand. Due to this, if you have poor credit, you might also have to offer your collateral to access the funding. That said, there are alternative lenders with flexible requirements. That is why many borrowers often consider it a challenge applying for sole trader business finance.

How can you decide which business loan to apply for as a sole trader?

Features and interest rates are the most important factors to consider while taking out a business loan for a sole trader. Besides these you should also consider:

• Approval time for the loan
• Early repayment facilities
• Repayment terms
• Loan terms

Final Thoughts

So, above contained information about sole trader business loans. By reading the above article, it will make applying for either an unsecured or secured business loan easy. However, it is always advisable to do some research on different lenders and then settle for the most suitable one that offers flexible loan terms with a higher amount and affordable interest. Do not waste your time, apply for the loan and use the funding to assist with your business needs.