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Working capital product

Fast money, priced accordingly , over months not years.

A short-term facility compresses a term loan into three to twelve months, frequently with daily or weekly repayments and a fee rather than a rate. Both of those change the arithmetic in ways the headline number hides.

Last reviewed 8 September 2026

Indicative repayment

Weekly

Disclaimer

$841/week

$3,646 /month $2,817 total interest

Loan amount $30,000

$5,000 $500,000

Loan term 9 months

6 months 5 years

Indicative rate 22.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

The short version

Five lines that should come before any application.

A fee is not a rate. A facility described as costing 12% over six months is not a 12% loan. Converting it to an annual equivalent is the only way to compare it with anything else.
Repayments are frequently daily or weekly. Which takes money out of the trading account continuously rather than monthly, and that changes what the business can absorb.
Speed is the product. It is what is being paid for, and it is genuinely valuable in a narrow set of situations. Outside those it is an expensive convenience.
It is the wrong instrument for a recurring gap. A short facility that is refinanced each time it matures compounds quickly, and this is the most common way it goes wrong.
Indicative only. Every figure here is illustrative. Actual pricing, terms and fees come from the lender after assessment.

The pricing

Why the headline number reads lower than the cost.

A short-term facility is commonly quoted as a total fee rather than as an interest rate. A $30,000 advance repaid as $33,600 over six months is described as costing 12%, which is accurate as a description of the total and misleading as a comparison against anything quoted per year.

Two things widen the gap. The first is the period: 12% charged over six months is roughly twice that as an annual equivalent before anything else is considered. The second is amortisation. Because repayments start immediately, the average balance outstanding across the term is well under the amount advanced, so the effective cost on the money actually in hand is higher again.

None of this is concealed. It is arithmetic that the quoting convention does not perform for the reader, and performing it takes a minute. A lender asked for the annual equivalent will ordinarily provide it, and a lender that will not has answered a different question.

Quoted as

A fee on the amount

Charged over

Months, not a year

Repaid

From day one

Effect

A higher annual equivalent

The same $30,000, three ways

What compressing the term does to the cost.

Illustrative on stated assumptions. The point is the direction rather than any lender’s pricing.

	Short-term, 6 months	Working capital loan, 18 months	Receivables facility
Amount	$30,000	$30,000	$30,000 drawn
Indicative cost basis	12% fee on the amount	16% a year	14% a year on drawn
Indicative total cost	~$3,600	~$3,000	~$2,100 for six months drawn
Repayment frequency	Weekly or daily	Weekly	As customers pay
Indicative weekly outgoing	~$1,290	~$425	Variable
Cost if repaid early	Fee ordinarily still applies	Interest ordinarily stops	Charge stops when repaid

Illustrative comparison on stated assumptions and rounded. Not an offer of credit.

Reading the table

The weekly figure is the part that decides it.

The cost difference between the three is real and it is not the largest difference in the table. A weekly outgoing of $1,290 against $425 is a three-fold difference in what leaves the trading account every week, and it lands on a business that took the facility because cash was already tight.

That is the mechanism behind most difficulty with short-term lending. The amount is affordable, the total cost is survivable, and the repayment velocity is what the business cannot absorb. A facility repaying at $1,290 a week has to be serviced out of trading from the first week, before whatever it funded has produced anything.

The row worth reading twice is the last one. Where the pricing is a fee rather than accruing interest, repaying early ordinarily does not reduce it, so the flexibility that makes a term loan forgiving is frequently absent here.

Where it genuinely fits

Four situations where the speed is worth the price.

The common thread is a specific, quantified opportunity or cost that will be lost by waiting, and a repayment source that does not depend on the thing being funded working out.

A discount larger than the fee

A supplier settlement discount or a bulk purchase saving that exceeds the cost of the facility is a straightforward trade, and the arithmetic can be done on one line before committing.

An urgent operational failure

Equipment that has stopped and is stopping revenue with it. The comparison is against lost trading days rather than against another lender, and it is frequently decisive.

A bridge to a known receipt

A facility repaid from a specific payment already contracted and dated. The exposure is short and the source is identified rather than hoped for.

A time-limited stock opportunity

Stock available at a price that will not last, where the margin on it covers the cost several times over and the stock turns inside the term.

The pattern to avoid

A short facility refinanced at maturity is the most expensive path available.

Where a facility matures and the gap it funded has not closed, the ordinary response is a new facility that repays the old one and advances a little more. Each cycle adds a fee to an amount that has not reduced, and after three or four the cost has overtaken the original shortfall. It rarely feels like a decision at any single point, which is what makes it worth naming in advance. Where a second short-term facility is being considered to deal with the first, the honest step is a conversation with an accountant about the underlying position rather than another application.

Against the alternatives

What else covers the same ground.

Where any of these is available, it will ordinarily cost less. The short-term facility earns its place when they are not available in the time frame that matters.

Feature	Short-term loan	Working capital loan	Invoice finance
Speed to funds	Fastest	Slower	Fast once established
Cost per dollar	Highest	Lower	Lower
Needs a receivables ledger	No	No	Yes
Repayment pressure	High and immediate	Moderate	Follows customer payment
Suits a recurring gap	No	Poorly	Yes
Early repayment reduces cost	Ordinarily not	Ordinarily yes	Yes

The second-to-last row is the most useful diagnostic. Nothing in this column suits a gap that returns, and a business in that position is better served by fixing the instrument than by repeating the facility.

The trade

What it gives and what it costs.

What it gives

Speed, which is the whole of the product and is genuinely valuable at times
Availability where trading history or credit history closes other doors
A short exposure, so the obligation does not persist for years
Simple documentation, with no valuation, title work or ledger review
A defined total cost, known before drawdown, where the pricing is a flat fee

What it costs

The highest cost per dollar of any facility on this site
Daily or weekly repayments that take money out of the trading account continuously
Pricing that ordinarily does not reduce on early repayment
A strong pull toward refinancing at maturity, which compounds quickly
A personal guarantee in most cases

When it goes wrong

Three ways this becomes a problem.

The repayment velocity is unmanageable

The total was affordable and the weekly outgoing is not, so the facility is serviced by delaying suppliers or by not paying tax on time.

What happens:One shortfall replaced by two, with the second carrying consequences of its own.

The facility is rolled at maturity

The gap has not closed, so a new facility repays the old one and adds a little. Each cycle adds a fee to a balance that is not reducing.

What happens:A cost that overtakes the original shortfall within a few cycles, from a series of decisions that each looked small.

The funded opportunity does not deliver

Stock that does not turn, or work that is delayed, while the repayment schedule runs on its original assumption.

What happens:A facility repaid out of general trading rather than out of what it funded, which is the case the term was too short to survive.

All three are visible before drawdown if the weekly figure is checked against the quietest recent week rather than against an average one. That single test prevents a large share of what goes wrong here.

The honest position

Why this page is not enthusiastic about the product.

Short-term lending is legitimate, regulated, and useful in the situations named above. It is also the product most often used for a purpose it does not suit, because it is the easiest to obtain at the moment a business is least able to evaluate it carefully. Saying so is not a criticism of the lenders; it is a description of when the demand arises.

The pricing is high for a reason. The lender is advancing to businesses that other lenders decline, without security, over a period too short to recover from a mistake. The rate reflects that risk rather than a failure of competition, and a business that qualifies for cheaper money is generally better served by taking the time to get it.

The test worth applying is whether waiting two weeks for a cheaper facility would cost more than the difference in price. Where it would, this is the right instrument and the price is fair. Where it would not, the two weeks are worth taking.

The repayment

What a short facility costs each week.

This runs the ordinary amortising arithmetic, which understates a facility priced as a flat fee. Where a lender quotes a fee, the total repayable divided by the number of weeks is the honest weekly figure. Indicative only, and not a quote or offer of credit.

Indicative repayment

Weekly

Disclaimer

$841/week

$3,646 /month $2,817 total interest

Loan amount $30,000

$5,000 $500,000

Loan term 9 months

6 months 5 years

Indicative rate 22.00% p.a.

8% (secured) 30% (unsecured)

Apply directly with Prospa Why Prospa

Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.

References

Sources

Commerce Commission
The regulator whose guidance covers lender conduct, fee disclosure and responsible lending.
Financial Service Providers Register
Where a New Zealand lender’s registration can be confirmed before an application is made.
Credit Contracts and Consumer Finance Act 2003
Relevant where a sole trader’s or guarantor’s borrowing is wholly or predominantly for personal use.
Ministry of Business, Innovation and Employment
Context for the wider regulatory framework covering business lending.
Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.

FAQ

Short-term working capital loan in New Zealand, questions answered

What is a short-term working capital loan?

A facility advanced over roughly three to twelve months, frequently with daily or weekly repayments and priced as a total fee rather than an annual rate. Speed and accessibility are what distinguish it, and the cost per dollar reflects both.

Why is a fee not the same as a rate?

Because a fee describes a total over the facility’s life rather than a cost per year, and because repayments start immediately so the average balance outstanding is well below the amount advanced. Both push the annual equivalent above the headline figure.

How do I compare it with a normal loan?

By asking the lender for the total amount repayable and the annual equivalent, in writing. Any lender can produce both, and with them two offers become comparable in a way that a fee and a rate side by side never are.

Why are repayments daily or weekly?

It reduces the lender’s exposure by recovering the advance steadily rather than at the end, and it suits businesses with daily takings. It also takes money out of the trading account continuously, which is the part worth testing against a quiet week rather than an average one.

Does repaying early save money?

Where the pricing is a flat fee, ordinarily not, or not much. That is a genuine difference from an interest-bearing facility and it is worth confirming before drawdown rather than assuming the flexibility exists.

When is this the right product?

When speed is worth the premium and the repayment source does not depend on the funded activity succeeding. A supplier discount larger than the fee, an urgent equipment failure, or a bridge to a contracted and dated receipt are the clearest cases.

When is it the wrong product?

When the gap recurs. A facility refinanced at each maturity adds a fee to a balance that is not reducing, and after a few cycles the cost overtakes the original shortfall. That pattern is the main way this product causes harm.

Is a personal guarantee required?

In most cases, yes. It is a real obligation reaching beyond the company, and what it covers is what the document says rather than what was understood at signing.

Does it affect the ability to borrow later?

It can. Another lender assessing a future application sees the facility, the repayment frequency and how it was serviced, and a short-term facility being serviced well reads differently from several taken in succession.

Are these lenders regulated?

New Zealand lenders are subject to the Fair Trading Act and to Commerce Commission oversight, and the Credit Contracts and Consumer Finance Act applies where borrowing is wholly or predominantly for personal use, which can reach a sole trader or a guarantor. Registration can be checked on the Financial Service Providers Register.

What is the single most useful check before drawing?

Comparing the weekly repayment against the quietest recent week of trading rather than against an average one. Most difficulty with this product is a velocity problem rather than a total-cost problem, and that check surfaces it.

Is this page financial advice?

No. It describes how a product works in general terms. This site is not a lender, a broker or a registered financial adviser, and whether a facility suits a particular business depends on facts a website cannot see.