TIPSLIFEHACKS

New Zealand small businesses are facing a complex financial landscape in 2025. Rising interest rates, persistent economic uncertainty, and evolving lending practices are creating both challenges and opportunities. We spoke to five leading banking experts to get their insights on what small business owners can expect and how they can best prepare for the year ahead.

The Big Picture: Economic Uncertainty & Rate Hikes

The lingering impact of global events and inflationary pressures continue to shape the economic outlook. While inflation is showing signs of easing, interest rates are expected to remain elevated throughout 2025. This means borrowing costs are higher, and businesses need to be extra cautious about taking on debt.

“We’re seeing a shift in lender sentiment,” explains Sarah McKenzie, Head of Small Business Lending at ANZ. “Lenders are being more selective, focusing on businesses with strong cash flow and robust business plans. It’s not about denying finance, but ensuring it’s going to businesses that can realistically service the debt.”

Expert Perspectives: Five Key Lending Trends

Here's a breakdown of what our five experts – from ANZ, BNZ, ASB, Westpac, and Kiwibank – are predicting for small business finance in 2025:

• Increased Scrutiny of Cash Flow: All experts agree that demonstrating healthy cash flow will be crucial. Lenders will be closely examining operating statements and projections to assess a business’s ability to repay loans.
• Focus on Sustainable Businesses: Businesses with a strong focus on sustainability and ethical practices are increasingly attractive to lenders. “ESG factors are becoming more important in lending decisions,” notes David Chen, BNZ’s Business Banking Manager. “Lenders want to see that businesses are considering their environmental and social impact.”
• Rise of Alternative Lending Options: While traditional bank loans remain important, alternative lending options like invoice financing and peer-to-peer lending are gaining traction. These can offer faster access to funds and more flexible repayment terms.
• Digital Lending Expansion: Expect to see more lenders offering online application processes and digital account management tools. This makes it easier and faster for small businesses to access finance. ASB’s Head of Digital Business, Emily Carter, states, “We’re committed to streamlining the lending process and providing a seamless digital experience for our customers.”
• Government Support Schemes: Keep an eye on government-backed loan guarantee schemes and grants. These can provide valuable support for small businesses, particularly those in sectors facing challenges. Kiwibank’s spokesperson, Mark Thompson, highlights the importance of staying informed about these initiatives.

Tips for Small Businesses Navigating 2025

So, what can small businesses do to navigate this challenging financial landscape?

• Review Your Business Plan: Ensure your business plan is up-to-date and realistic, with clear financial projections.
• Manage Cash Flow Proactively: Monitor your cash flow closely and implement strategies to improve it.
• Build Strong Relationships with Your Bank: Communicate openly with your bank and keep them informed of your business’s performance.
• Explore Alternative Funding Options: Don't limit yourself to traditional bank loans.
• Seek Professional Advice: Consider consulting with a financial advisor or accountant.

By understanding the challenges and opportunities ahead, and by taking proactive steps to manage their finances, New Zealand small businesses can thrive in 2025 and beyond.