Late customer payments
B2B businesses on 60-90 day customer payment cycles.
Loan type
Business lines of credit for New Zealand cash flow.
A revolving credit facility for recurring or unpredictable cash gaps. Draw, repay, redraw across the term. Interest only on the drawn balance. NZ amounts $2K to $500K.
Last reviewed 5 May 2026
Indicative repayment
Weekly
$565/week
$2,448 /month $8,756 total interest
$50,000
$5,000 $500,000
2 years
6 months 5 years
16.00% p.a.
8% (secured) 30% (unsecured)
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 $50,000 scenario
2 years at 16.00%. Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
Educational
Indicative only. Why we say this
Quick answer
Business line of credit in NZ.
- Revolving facility draw and redraw across the access period; interest on the drawn balance only.
- $2K to $500K typical NZ market range; under $150K commonly unsecured, larger amounts may require security.
- Indicative 12% to 20% on the drawn balance, calculated daily and charged monthly.
- Suits recurring gaps best for B2B businesses on long payment cycles and seasonal cash-flow swings.
What it is
A revolving credit facility for working capital.
A business line of credit is a pre-approved revolving credit facility. Unlike a term loan that is taken once and repaid on a fixed schedule, a line of credit is drawn and redrawn as needed across the access period (typically 2 years), with interest charged only on the drawn balance.
The structure suits businesses with recurring or unpredictable cash gaps: B2B operators waiting on customer payments, seasonal businesses, and growing services firms hiring ahead of revenue. The cost efficiency comes from only paying interest on what is actively drawn, rather than the full facility limit.
Prospa offers the most-recognised NZ alternative-lender line of credit ($2K to $500K), Heartland Extend offers a NZ-bank version, and major banks compete via business overdraft products which serve a similar function.
Limit
$2K to $500K
Access
2 years revolving
Interest
On drawn balance only
Rate band
12% to 20% indicative
Vs alternatives
Line of credit vs term loan vs overdraft.
| Feature | Line of credit | Term loan | Overdraft |
|---|---|---|---|
| Cash flow | Drawn as needed | Lump sum upfront | Drawn as needed |
| Interest | On drawn balance | On full balance | On negative balance |
| Term | 2 years revolving | Fixed term 6-60 mo | Open-ended |
| Indicative rate | 12% to 20% | 12% to 25% | 10% to 16% |
| Provider | Alternative + Heartland | All lenders | Major banks mostly |
| Suits | Recurring cash gaps | One-off purposes | Trading-account buffer |
Common uses
When NZ businesses use a line of credit.
Seasonal swings
Hospitality, retail, tourism with predictable quiet quarters.
Payroll smoothing
Wages out today; client billings settle in 30 days.
Stock cycles
Repeating purchase-sell-repurchase without taking out separate loans each time.
How it works
Applying for a NZ business line of credit.
01
Day 1
Online application
Standard online form. NZBN, owner ID, requested limit, purpose. The conversation is about the recurring gap, not a single funding need.
Documents commonly required
- NZBN
- Director ID
- Limit and purpose
02
Day 1 to 2
Bank statement and credit assessment
Last 6 months business bank statements. Credit checks on business and directors. The lender assesses against turnover stability rather than a single repayment.
Documents commonly required
- Last 6 months bank statements
- Director credit consent
03
Day 1 to 5
Facility approval and setup
Approved limit, indicative rate on drawn balance, fees, access period. The facility is opened but no interest accrues until drawing begins.
04
On demand throughout the access period
Draw, repay, redraw
Funds drawn via app, internet banking, or direct payment. Interest accrues daily on drawn balance, charged monthly. Repayments reduce the balance and free up the limit again.
Lenders
NZ line of credit providers.
Best for fast online line of credit
Prospa
$2K to $500K Business Line of Credit. Online application, draw via app, interest on drawn balance.
Indicative rate band:12% to 20% p.a.
Read onBest for NZ-bank line of credit
Heartland Bank
Heartland Extend is a working-capital facility for established borrowers. Mid-priced major-bank-tier.
Indicative rate band:10% to 16% p.a.
Read onBest for broader credit appetite
BizCap
Line of credit and short-term unsecured for harder profiles. Higher rate band; faster decisions.
Indicative rate band:15% to 25% p.a.
Read onBest for best rate, larger amounts
Major banks (overdrafts)
Major banks compete via business overdraft products serving a similar function. Often property-secured.
Indicative rate band:10% to 16% p.a.
Read onWorked scenarios
Three NZ line-of-credit scenarios.
Indicative interest costs across three different NZ businesses using a line of credit, illustrating how the cost is governed by the drawn-balance pattern rather than the headline limit.
Professional services
Auckland B2B services, late customer payments
A North Shore consultancy on 60-day client payment terms. $80K of monthly invoices typically settle 30 to 75 days after issue. A $100K line of credit covers the timing gap between paying staff and client settlement.
Drawn balance averages $50K across the year, repriced as client invoices land. At 14% indicative, interest cost runs ~$7,000 per year, materially less than the equivalent term loan would charge against the full $100K.
Indicative figures
- Approved limit
- $100,000
- Average drawn
- ~$50,000
- Indicative rate
- 14% p.a.
- Annual interest
- ~$7,000
Tourism
Queenstown tourism, seasonal swings
A Queenstown adventure operator with a clear high-season (Oct to Apr) and shoulder/quiet quarters (May to Sep). A $200K line of credit funds wages and fixed costs through the quiet quarters, repaid as bookings ramp.
Pattern: zero drawn through the high season; up to $150K drawn over winter; repaid in full by end of November. Annual interest cost depends entirely on the months drawn, which is the structural advantage over a term loan.
Indicative figures
- Approved limit
- $200,000
- Peak drawn
- $150,000
- Months drawn
- ~6 / year
- Annual interest
- ~$12,000
Retail
Wellington retailer, stock cycle
A Cuba Street homewares retailer running 6 to 8 stock cycles per year. A $50K line of credit funds each stock buy, repaid as the stock sells through (8 to 12 weeks later).
Drawn balance oscillates between $5K and $40K across the year. Indicative 17% p.a. on the drawn balance generates interest of ~$3,400 across 12 months. The same purchase pattern via a term loan would tie up the full $50K continuously.
Indicative figures
- Approved limit
- $50,000
- Drawn pattern
- $5K to $40K
- Indicative rate
- 17% p.a.
- Annual interest
- ~$3,400
Trade-offs
Where a line of credit fits, and where it doesn't.
Where it fits
- Recurring or unpredictable cash gaps, where the timing of need is uncertain but the gap is real.
- B2B businesses on long customer-payment cycles where revenue is locked-in but late.
- Seasonal businesses with predictable high and quiet quarters, where the line is drawn for known months.
- Businesses already using overdrafts but wanting a separate facility from the trading account.
- Borrowers who value the option of access without the cost of full drawdown from day one.
Where it doesn't
- One-off lump-sum purchases (equipment, vehicles, fit-out), where a term loan or asset finance is structurally cheaper.
- Borrowers who lack the discipline to repay drawn balances when cash returns; an undrawn line saves nothing if the balance is permanently outstanding.
- Brand-new businesses without 6 to 12 months trading; the lender prices recurring access on stable turnover.
- Long-term funding needs (3+ years) where amortising term loans are typically cheaper than continuously rolled credit.
- Borrowers wanting the lowest possible rate; major-bank overdrafts often price below alternative-lender lines of credit.
When it goes wrong
Default scenarios on a line of credit.
A line of credit defaults on the drawn balance, not the approved limit. Three common scenarios in the NZ market.
Missed minimum payments
Most NZ lines of credit require interest payments on the drawn balance monthly; some require a minimum principal payment too. A missed cycle typically triggers a lender check-in.
What happens:Late fees apply. Drawn balance no longer reduces. Continued non-payment leads to the facility being frozen (no further draws) and the balance being formalised into amortising repayments.
Facility freeze
On material non-payment or trading deterioration, the lender freezes further draws and converts the existing drawn balance to a fixed-term amortising loan (typically 12 to 24 months) until paid in full.
What happens:Working capital flexibility lost; the borrower is now repaying on a fixed schedule. The credit file marks; future facility renewals materially harder.
Default on personal guarantee
On formal default, the lender pursues recovery under the director PG. Lines of credit are typically unsecured (under $150K) so PG enforcement is the primary recovery path.
What happens:Personal credit files mark for 5 years. Lender can pursue personal assets. Future personal and business borrowing materially harder.
Most NZ line-of-credit defaults stem from the drawn balance being permanently outstanding rather than oscillating with cash flow. Borrowers using a line of credit as a permanent term loan typically refinance to an actual term loan (usually cheaper) before the lender forces the conversion.
References
Sources
- Prospa NZ: Line of Credit
Indicative pricing reference.
- Heartland Bank: Business Extend
Heartland working-capital facility.
- IRD: Interest deductibility
Tax framing.
- Reserve Bank of NZ: Lending data
NZ revolving credit volume context.
FAQ
Business line of credit, NZ small-business questions answered
What is a business line of credit?
A business line of credit is a pre-approved revolving credit facility. The lender approves a limit; the borrower draws funds as needed, repays them, and redraws later across the access period (typically 2 years). Interest is charged only on the drawn balance, not the full limit.
How is it different from a term loan?
A term loan is a single lump sum drawn at settlement and repaid on a fixed schedule with interest on the full balance from day one. A line of credit is drawn as needed; interest only accrues on drawn balances, and unused limit costs nothing. Lines of credit suit recurring gaps; term loans suit one-off purposes.
How is interest calculated?
Interest accrues daily on the drawn balance, calculated as (drawn balance × annual rate ÷ 365), and charged monthly. If $30K is drawn and the rate is 16%, daily interest is roughly $13. Interest stops accruing on any portion repaid.
How much can I get a line of credit for?
NZ products commonly run $2K to $500K. Under $150K is typically unsecured (director PG); larger amounts may require qualifying business assets or property security. The achievable limit depends on monthly turnover and trading history.
Are there fees beyond interest?
Common fees include an establishment fee at facility opening, sometimes a monthly service fee (often $0 to $40), and occasionally a draw fee. Some lenders charge non-utilisation fees on undrawn limits but most NZ products do not. The loan contract is the authoritative reference.
How fast can I get a line of credit?
Online lenders (Prospa, Heartland Open for Business pathway) commonly approve a line of credit within a business day for established borrowers. Major-bank overdrafts run a longer relationship-banker process, 1 to 3 weeks.
What happens at the end of the access period?
At the end of the 2-year access period, the lender typically offers renewal subject to a fresh credit review. If renewed, the facility continues. If not renewed, the drawn balance converts to a fixed-repayment term loan (commonly 12 to 24 months amortisation) until paid in full.
Can I repay the drawn balance any time?
Yes, line of credit repayments are flexible. Most NZ products allow any-amount repayments at any time without break fees because the term is revolving rather than fixed. This is the structural reason interest savings are real on early repayments.
Can a sole trader get a line of credit?
Yes, sole traders are eligible across NZ alternative-lender lines of credit. Common minimums are NZBN, 6 to 12 months trading, and clean credit. Sole-trader applications can occasionally trigger CCCFA where the borrowing is wholly or predominantly for personal use.
Is the interest tax-deductible?
Interest on the drawn balance of a business line of credit is generally deductible against business income in NZ, subject to the accountant's confirmation. The deductibility applies as interest accrues, not as the limit is approved.
Line of credit vs business overdraft?
A line of credit is a separate facility (separate from the trading account) provided by alternative lenders or specialist banks. A business overdraft is attached to the trading account itself, provided by major banks. The mechanics are similar; the difference is institutional and how the borrower interacts with the funds.
What documents are required?
NZBN, business owner ID, last 6 months business bank statements, requested limit, and purpose statement. Larger amounts may add an aged debtors report and a P&L. Self-employed applications may add an accountant letter.
Related
Related reading
Working capital
The most common purpose for a line of credit.
Read onBusiness overdraft
The major-bank equivalent product attached to the trading account.
Read onWorking capital loan
The fixed-term alternative for one-off cash gaps.
Read onCafe loans
Pre-summer stock and quiet-week payroll patterns suit a line of credit.
Read onClothing and fashion retail
Winter and summer inventory cycles drive recurring drawdowns.
Read on