SME sentiment is still very cautious, but having options is key
Confidence may be returning to New Zealand’s small business sector, but it’s still cautious and uneven.
In May 2025, the Prospa NZ SME Sentiment Tracker Report showed that 57% of SMEs rated their business health as “good” or “very good” - however, nearly 60% were running on three months or less of cash reserves, and 22% had less than a month. Profit expectations were mixed. Only 35% anticipated growth, while 43% expected profits to remain flat.
Since then we’ve had Budget 2025 and its Investment Boost. While initial reception was positive, Kiwibank still describes current business investment as “quiet”. Its August commentary noted that although interest rates have likely peaked, firms are waiting for clearer economic conditions before committing to capital spending.
When business bankers were asked if clients were considering taking up the investment boost, two thirds of responses were ‘no.’
In short, the incentive exists, but many businesses still lack the liquidity or confidence to act on it.
Funding strategy in a muted market
At least part of the disconnect between policy incentives and actual business investment comes down to funding options. Prospa managing director Adrienne Begbie says that business owners often delay action because they have been declined by main banks, or don’t know where to look for accessible funding.
Some turn to crowdfunding or seeking investment, and Begbie says these strategies each have their pros and cons.
“The pros of crowdfunding are in brand awareness and community,” Begbie tells NZ Adviser. “The cons can be that it’s too lengthy and you may have to give away equity or rewards, so it really depends on what the business owner is looking for.
“It’s similar with investors - you can go to family, other companies or big investors, and that also comes with the con of handing over a portion of your business.”
For businesses needing cash flow or availability of funds, Begbie says that a line of credit is usually the better way to go. A small business loan is best if the business is looking to buy equipment or retail stock.
Prospa's own lending data shows that 42% of funds go toward working capital - supporting everyday operations, short-term purchases, and incremental upgrades. These are the same categories that could benefit most directly from Investment Boost, provided businesses can secure funding upfront.
The opportunities for advisers
As we move into the spring property season, adviser communications with existing clients will be picking up. Begbie says it’ll be a prime time to ask how business is going, and to be ready with options for funding.
She notes that there's also the misconception that just because somebody owns a home that they could use as collateral, that means they can go straight to a main bank. Begbie notes that she sees this often with advisers dealing with customers who own homes or have considerable assets - they may not see alternative lenders as being relevant to their clients.
“When someone is only looking for a $50-50k loan, they often don’t want to have to refinance, top up their home loan, or even put their home on the line,” Begbie explains.
“Anyone has those customers in front of them - a small business customer will invariably need cash flow funding sometime during the year.
“For advisers, it’s about identifying the opportunity and sending it on. They’re not necessarily giving advice - but if they’re doing the mortgage or the insurance, it’s something they can refer customers onto.”
