Working capital finance helps New Zealand businesses manage their day-to-day cash flow — covering operational expenses, payroll, stock purchases, and the gap between invoicing clients and getting paid. For many NZ businesses, having access to flexible working capital is as important as long-term investment finance. This guide explains what working capital is, the main finance options, indicative costs, and when a business typically needs it. It’s general information, not financial advice.
What working capital is
Indicative rates
Broad, indicative ranges — always confirm current rates and fees with the lender.
| Product | Typical cost |
|---|---|
| Business overdraft | ~10% – 15% p.a. (on drawn balance) |
| Revolving credit (secured) | ~8% – 14% p.a. |
| Invoice finance | ~1.5% – 3% per 30 days of invoice value |
| Short-term unsecured loan | ~18% – 35%+ p.a. |
When a business typically needs it
- Seasonal cash-flow gaps (retail before Christmas, farming between harvests)
- Rapid growth that outpaces invoice collections
- Waiting on slow-paying customers (government, large corporates)
- Unexpected costs (equipment repair, an insurance excess, compliance)
- A large new contract needing upfront stock or labour
The main types of working capital finance
New Zealand’s main working capital products are business overdrafts, revolving credit facilities, invoice finance, and short-term business loans — each suited to a different situation.
Reference sources
- business.govt.nz — managing cash flow and business finance: business.govt.nz
- Inland Revenue — GST and provisional tax for business: ird.govt.nz
- Financial Service Providers Register — check a lender is registered: fsp-register.companiesoffice.govt.nz
- Regional Business Partner Network — free/subsidised business advice: regionalbusinesspartners.co.nz
For the wider business-lending picture, see our business finance guide, and our small business loans guide covers term lending for SMEs.
Rates, and when it’s needed
The four main asset-finance structures
They differ in who owns the asset, whether it’s on your balance sheet, and how it’s taxed.
| Structure | Ownership | Best for |
|---|---|---|
| Hire purchase | Transfers to you at the end (often after a final balloon payment); on your balance sheet from day one | Vehicles and equipment you want to own |
| Finance lease | Stays with the financier — at the end you extend, return or refinance; usually on your balance sheet | Plant and equipment |
| Operating lease | Financier keeps it throughout (essentially a rental); off your balance sheet | Assets you upgrade often (IT, fleet vehicles) |
| Chattel mortgage | You own it from day one; the lender holds a security interest until it’s repaid | Vehicle finance (similar tax to hire purchase) |
In short: hire purchase and chattel mortgage lead to ownership; a finance lease keeps your options open; an operating lease is a rental for things you’ll replace. The right one depends on whether you want to own the asset and how the tax treatment fits your business.
How to choose
The right product depends on the nature of your cash-flow gap. A revolving need — a buffer that fluctuates month to month — usually suits an overdraft or revolving credit facility, where you pay interest only on what you use. A gap caused specifically by slow-paying customers points to invoice finance, which unlocks money you’ve already earned. And a one-off, urgent, short-lived need might justify a short-term loan, accepting a higher rate for speed. Whichever you consider, compare the total cost across a couple of lenders (not just the headline rate — establishment fees and short terms matter), check the fees and early-repayment terms, and make sure the repayments genuinely fit your cash-flow cycle. Our understanding loans guide covers the fundamentals, and since GST timing is a common cash-flow pressure, our GST guide is worth a look too.
The bottom line
Working capital finance is about timing, not survival — it bridges the gap between money going out and money coming in, so a profitable business isn’t tripped up by its cash-flow cycle. Bank overdrafts and revolving facilities are the cheapest options for ongoing needs; invoice finance suits businesses waiting on large, slow invoices; and short-term loans offer speed at a higher price for urgent one-offs. Match the product to the problem, compare the true cost, and — just as importantly — work on the underlying cash flow (invoicing promptly, chasing debtors, planning for seasonal dips) so you rely on finance by choice rather than necessity.
Disclaimer: This article is general information about working capital finance in New Zealand, not financial advice, and not a recommendation of any lender or product. Interest rates, fees and terms vary by lender and change over time — the figures here are indicative only, and any named lenders are examples of the market, not endorsements. Always confirm current rates and terms directly with lenders and compare the total cost of borrowing. Consider advice from an accountant or business adviser before taking on business debt.
What can be financed — and typical rates
Frequently asked questions
What is working capital finance?
It’s short-term funding that helps a business cover its day-to-day running costs — payroll, suppliers, stock — when cash flow is tight, particularly in the gap between invoicing a customer and being paid. The main options in NZ are business overdrafts, revolving credit facilities, invoice finance, and short-term business loans.
What’s the difference between an overdraft and a revolving credit facility?
Both let you draw down and repay flexibly, paying interest only on what you use. An overdraft is usually smaller and attached to your business bank account; a revolving credit facility tends to be larger, more structured, and often secured against property or assets — making it more suited to bigger SMEs.
What is invoice finance?
Invoice finance (or debtor finance) lets you borrow against your unpaid invoices. A lender advances around 70–90% of an invoice’s value straight away, then releases the balance minus fees once your customer pays. It’s ideal for businesses that issue large invoices on 30–90 day terms and are held up by slow-paying customers.
How much does working capital finance cost?
It varies by product: business overdrafts are typically around 10–15% p.a. on the drawn balance, secured revolving credit around 8–14%, invoice finance roughly 1.5–3% per 30 days of invoice value, and short-term unsecured loans 18–35% or more. These are indicative — confirm current rates and fees, and compare the total cost.
When should a business use working capital finance?
Common triggers are seasonal cash-flow gaps, rapid growth outpacing invoice collection, slow-paying customers, unexpected costs, or a large new contract needing upfront outlay. It’s best used to bridge a genuine, temporary timing gap — not to prop up a business that’s structurally unprofitable, where the underlying issue needs addressing instead.
Is it better to use finance or fix my cash flow?
Ideally both. Finance is a useful tool for genuine timing gaps, but it costs money — so alongside it, improving your cash flow (invoicing promptly, tightening payment terms, chasing debtors, planning for seasonal dips) reduces how often you need to borrow. Free help is available through business.govt.nz and the Regional Business Partner Network.
Related guides: Asset Finance NZ.
