The gap between paying and being paid.
An independent guide to how New Zealand businesses fund the space between spending money and receiving it, and a calculator that shows what a facility actually costs. Nothing here is a quote, and no details are collected.
Indicative interest cost
Weekly
$202/week
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $150,000 scenario
$75,000 drawn at 14.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
What this is
A funding gap, made measurable.
Almost every profitable New Zealand business runs a working capital gap. Wages are paid weekly and billed monthly. Stock is bought months before it sells. Customers on thirty-day terms pay at fifty. None of that is a failure, and all of it consumes cash the business has already earned but cannot yet spend.
The instruments that fund the gap are not interchangeable. A term loan suits a shortfall that has a size and an end. A receivables facility suits one caused by payment terms. A revolving facility suits one that opens and closes every quarter. Choosing the wrong shape is the most expensive ordinary mistake in this whole area, and it is made constantly.
This site covers each facility on its own page, in the same shape, so they can be compared rather than described. It also covers the measurement that sizes the gap properly, because a business that knows its cash conversion cycle asks a lender a much better question than one that knows only that things feel tight.
Facilities covered
8
Indicative amount range
$5k to $500k
Common structures
Term and revolving
Personal details collected
None
The facilities
Eight ways to fund a working capital gap.
Each page covers what the facility funds, how it is priced, what a lender assesses, what it costs in comparable terms, and which businesses it actually suits. Indicative bands only.
Working capital loan
A term facility for a gap that can be sized. Fixed amount, fixed schedule, and the wrong shape for a gap that recurs.
Read onShort-term loan
Three to twelve months, frequently priced as a fee rather than a rate. Fast, accessible and the most expensive money here.
Read onMerchant cash advance
Repaid as a share of card takings, so a quiet week repays less. The term is an outcome rather than an input.
Read onInvoice finance
An advance against invoices already issued, confidential and frequently selective. The ledger is the security.
Read onInvoice factoring
The disclosed version, where the funder collects. Funding and a credit control function bought together.
Read onDebtor finance
A whole-of-ledger facility whose limit is recalculated from a borrowing base as the ledger moves.
Read onTrade finance
Funding an importer from supplier payment through to sale, which is the part no domestic facility reaches.
Read onSupply chain finance
A buyer-arranged programme letting suppliers take early payment at the buyer’s credit rating.
Read onSide by side
What actually differs between the four most common.
The gap does not change. Everything in this table does, and the row that decides most cases is the second.
| Term loan | Revolving facility | Invoice finance | Merchant advance | |
|---|---|---|---|---|
| Amount | Fixed at drawdown | A limit, drawn as needed | Moves with the ledger | Fixed at drawdown |
| Available every cycle | No | Yes | Yes | By reapplying |
| Cost when unused | Full interest | Little or none | Standing fees only | Not applicable |
| Repayment | Scheduled | At the business’s discretion | As customers pay | A share of card takings |
| Assessed on | The trading position | The trading position | The receivables ledger | Terminal history |
| Relative cost per dollar | Moderate | Moderate | Higher | Highest |
| Suits a gap that is | One-off and sized | Recurring and variable | Caused by payment terms | Seasonal, on card takings |
How the four most common New Zealand working capital facilities differ. Indicative only, and not an offer of credit.
The decision underneath
Two questions settle most of it.
Question one
Does the gap close on its own.
A gap that is an event has a size and an end. A large order to fund, a quarter where tax and a seasonal low collided, a supplier that changed its terms. A term facility matches it well, because the facility also has a size and an end.
A gap that is a condition reopens the moment it is closed. A business invoicing on thirty days and collecting on fifty has one every cycle, and a term loan pays down the last one rather than funding the next.
The question that separates them is whether the same shortfall will exist next quarter for the same reason. It takes a minute to answer honestly and it determines which half of this site is relevant.
Question two
What does the business have to offer.
A receivables ledger points at invoice finance, factoring or debtor finance, all of which are cheaper than unsecured lending because the funder has something to assess beyond the trading position.
Card takings point at a merchant advance, where repayment falls automatically in a quiet week. Neither of those, and the answer is an unsecured facility priced for a lender with no fallback.
That is why two similar businesses are quoted very differently. The pricing follows what the lender can look to rather than how deserving the applicant is, and knowing which category the business falls into avoids applying in the wrong direction.
Before any facility
Measure the gap before funding it.
The cash conversion cycle gives the number of days a business funds its own operations, and multiplying it by daily cost of sales gives roughly how much capital is tied up. That figure is the right size for a facility, and it is also the number that shows how much of the gap could be closed operationally rather than borrowed. Ten days off a cycle releases real capital permanently, at no cost and with nothing to repay, which is a better trade than any facility on this site.
By situation
Five reasons a gap opens.
Businesses rarely start by choosing a facility. They start with a situation, and the situation usually points at one.
Covering payroll
Wages go out weekly and invoices come in monthly. The most rigid outgoing against the least flexible timing.
Read on DatedPaying GST or provisional tax
A published date calculated on a period already past, arriving in whatever month it lands in.
Read on AnnualA seasonal cash-flow gap
Fixed costs running through the quiet months, and the pre-season build that follows them.
Read on InventoryBuying stock
Cash converted into goods that convert back only when they sell and the customer pays.
Read on ReceivablesBridging a late-paying debtor
The gap between agreed terms and actual behaviour, funded quietly by the supplier.
Read onThe honest limit
What this site cannot tell you.
Every rate band here is indicative. Nobody publishing a website in New Zealand can say what a specific business will be charged, because the price is a function of trading history, the ledger, the customers, the amount and a credit assessment, and only the lender sees all of them. The bands describe a market rather than an offer.
The tax framing has a harder limit. GST timing, the treatment of trading stock and how a facility interacts with a business’s position all depend on facts a website cannot see, which is why every tax statement here carries the accountant caveat in the same sentence as the claim rather than as a formality.
This site is an education site and a calculator. It is not a lender, a broker or a registered financial adviser, and nothing on it is personalised financial advice.
References
Sources
- Personal Property Securities Register
Backs the statements about the general security interest a receivables facility ordinarily registers.
- External Reporting Board
The publisher of the standards governing how current assets and liabilities are classified.
- Inland Revenue, GST
The published source for GST as a current liability with fixed due dates.
- Commerce Commission
The regulator whose guidance covers lender conduct and fee disclosure.
- Financial Markets Authority, financial advice
Backs the distinction drawn between class information and regulated financial advice.
FAQ
Working capital in New Zealand, questions answered
What is working capital?
Current assets less current liabilities, which measures whether a business can meet its short-term obligations from its short-term resources. In practice it is the money tied up in stock and unpaid invoices that the business has earned but cannot yet spend.
Why do profitable businesses run out of cash?
Because profit and cash arrive at different times. A business can be profitable on every job and still be short, because it pays for delivery weeks before it bills and months before it collects. Growth makes that worse rather than better.
Which facility is cheapest?
Receivables-based facilities are ordinarily cheaper than unsecured lending because the funder has a ledger to assess. Beyond that the comparison depends on the fee structure, and a rate quoted per thirty days is not comparable with one quoted per year.
How do I know how much I need?
From the cash conversion cycle. The number of days between paying and being paid, multiplied by daily cost of sales, gives roughly the capital tied up at current trading. That figure is the right size for a facility.
Is a term loan a reasonable way to fund working capital?
Only where the gap is one-off and sized. Where it recurs every cycle, a facility that repays to zero funds the last one rather than the next, which is how a timing problem becomes a debt problem.
What do lenders look at?
Bank statements first, particularly the low points rather than the averages. Then existing commitments, trading history and credit history. On a receivables facility the aged debtors report carries much of the decision instead.
Does this site arrange finance?
No. It is an education site with a calculator. There is one disclosed referral to Prospa on the calculator, no contact form, and no personal details are collected anywhere on the site.
Are the figures here quotes?
No. Every figure on this site is indicative and illustrative, calculated on stated assumptions. Actual rates, fees and terms come from a lender after assessment, and nothing here is an offer of credit.
What is the cheapest way to improve a working capital position?
Invoicing promptly and correctly. It costs nothing, works within a single cycle, and a large share of slow payment traces to invoices issued late or rejected by a customer’s process rather than to customers choosing to pay late.
Is anything here financial advice?
No. This site is not a lender, a broker or a registered financial adviser. It provides general information about how these facilities work, and what suits a particular business depends on facts a website cannot see.
Related
Where to next
All eight facilities
Every product compared in the same shape.
Read onWhat working capital is
The formula, the ratio, and what they miss.
Read onThe working capital cycle
The measurement that sizes a facility properly.
Read onWhy gaps open
Five situations, and what each one points at.
Read onWorking capital calculator
The position, worked on your own figures.
Read on