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.
The pattern runs zero drawn through the high season, up to $150K drawn over winter, and repaid in full by the 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.
What a facility actually costs
Indicative cost of a line of credit by how much is drawn.
The headline rate on a line of credit is charged on the drawn balance, not the limit, which is the feature that makes the product hard to compare against a term loan. A facility sitting unused costs the line fee and nothing else. The table below runs a $100,000 limit at an indicative 16% across a range of average utilisation, with an indicative 1.5% annual line fee on the full limit, to show where the crossover against a term loan sits.
| Average drawn | Indicative interest, year | Line fee, year | Total indicative cost | Effective cost on limit |
|---|---|---|---|---|
| $0 (facility held, unused) | $0 | $1,500 | $1,500 | 1.5% |
| $20,000 (20%) | $3,200 | $1,500 | $4,700 | 4.7% |
| $40,000 (40%) | $6,400 | $1,500 | $7,900 | 7.9% |
| $60,000 (60%) | $9,600 | $1,500 | $11,100 | 11.1% |
| $80,000 (80%) | $12,800 | $1,500 | $14,300 | 14.3% |
| $100,000 (100%, fully drawn) | $16,000 | $1,500 | $17,500 | 17.5% |
Indicative only, not a quote or offer of credit. Assumes a $100,000 limit, a 16% annual rate on the drawn balance and a 1.5% annual line fee on the full limit, held flat across the year. Actual rates, fees and structures are set by the lender after assessment.
The comparison that matters
Utilisation, not rate, decides whether a line of credit is cheap.
A facility drawn near its limit for most of the year is a term loan with a worse rate and a line fee on top. A facility that sits at 20% for ten months and spikes twice is doing the job the product exists for, and the same 16% headline is then a fraction of the cost of holding that money as a term loan all year. The figure worth calculating before signing is not the rate, it is the honest expected average balance across twelve months. Where that number lands close to the limit, the cheaper structure is usually a term loan.
Renewal and review
What happens at the end of the access period.
A line of credit is typically written with an access period of around two years rather than as an open-ended arrangement, and that end date is the part most likely to be forgotten. At renewal the lender reassesses the facility against current trading, and the outcome is commonly one of three: renewed on the same terms, renewed at a reduced limit, or converted to an amortising term loan repaid over a set period.
A reduced limit at renewal is the one that causes trouble, because a business that has come to treat the facility as working capital finds the room it was relying on has shrunk with little notice. The usual triggers are a decline in turnover, a run of high utilisation that reads as reliance rather than flexibility, or a change in the lender own appetite for the sector.
Sustained high utilisation is typically read by lenders as a signal in its own right. A facility that never drops below 90% drawn does not look like a business managing timing gaps; it looks like a business that has quietly borrowed a term amount and is servicing it at revolving-facility pricing. NZ lenders commonly review on that pattern specifically.
The practical implication is that a line of credit rewards being allowed to breathe. A facility that returns to zero, or close to it, at some point in each quarter reads as a working-capital tool and is far more likely to renew on unchanged terms.
Common pitfalls
Six things that catch NZ borrowers on a line of credit.
A revolving facility fails differently from a term loan. None of the following appear in a rate comparison, and all six are common enough to be worth naming before signing.
Treating the limit as revenue
A facility drawn to fund a shortfall that never closes is a term debt wearing a revolving label. The tell is a balance that has not returned to zero in twelve months. Lenders read that pattern at renewal and commonly reduce the limit in response.
Ignoring the line fee
The fee applies to the full limit whether the money is drawn or not. Approving a $200,000 limit because it was offered, then averaging $30,000 drawn, means paying to hold room that is not being used.
Missing the access-period end
The access period is commonly around two years. A facility that converts to an amortising term loan at that point produces a repayment obligation the business had not budgeted for, on a date set two years earlier.
Redraw assumed, not confirmed
Not every NZ facility permits redraw on the same terms after a repayment. Where the limit reduces as it is repaid, the product behaves like a term loan and the flexibility being paid for is not there.
Variable rate treated as fixed
Most revolving facilities price on a variable rate that can move with the lender base rate. A budget built on today rate on a fully drawn facility carries more sensitivity than the same amount on a fixed term loan.
Stacking multiple facilities
Holding a line of credit, an overdraft and a short-term loan at once is read by later lenders as reliance rather than as prudent structuring, and it commonly narrows the options available at the point they are most needed.
Worked example
A Wellington design agency covering a 60-day payment cycle.
The agency invoices corporate and government clients on 30-day terms that in practice settle closer to 55 to 65 days. Payroll for eleven staff runs fortnightly regardless. The gap between the work being delivered and the money arriving averages around eight weeks, and it is structural rather than occasional.
A $120,000 line of credit at an indicative 15% covers the trough. Across the year the facility averages around $45,000 drawn, spiking to roughly $95,000 in the two months after the largest project delivery and returning close to zero in the quarter when the government invoices settle.
On these assumptions the interest cost lands near $6,750 for the year, with an indicative 1.5% line fee on the full limit adding $1,800, for roughly $8,550 in total. The comparison the agency ran was against a $120,000 term loan at an indicative 13%, which would have cost close to $15,600 in year-one interest on a balance that would have sat in the account unused for much of the year.
The facility is the cheaper structure here because the average utilisation is well below the limit. Had the agency drawn to $110,000 and stayed there, the term loan would have won on cost and the revolving structure would have been paying a premium for flexibility it was not using.
Indicative figures, year one
- Facility limit
- $120,000
- Average drawn
- ~$45,000
- Peak drawn
- ~$95,000
- Indicative rate
- 15% p.a.
- Interest, indicative
- ~$6,750
- Line fee at 1.5%
- $1,800
- Total indicative cost
- ~$8,550
Indicative only, based on the assumptions stated above. Actual cost depends on the drawn balance day by day, the rate the lender sets and the fee structure of the specific facility.
The closest alternative
Line of credit or overdraft, and why the answer is usually the bank relationship.
Line of credit
A separate facility, from a wider field of lenders.
A line of credit is provided as its own facility and does not require the trading account to move. That single structural difference is what opens the product up to alternative lenders as well as banks, and it is the reason a line of credit is commonly available to businesses an overdraft is not.
Approval is faster in most cases, with assessment measured in days rather than weeks, and the trading-history threshold is generally lower. Six to twelve months of trading is a common minimum where a bank overdraft would want two years of accounts.
The cost of that access is the rate. Indicative pricing of 12% to 20% sits above overdraft pricing, and the gap is widest for businesses that would qualify comfortably for both. Drawing and repaying is done deliberately, through a transfer, which some operators find clearer than an account balance quietly going negative.
Overdraft
Cheaper, attached to the account, harder to get.
An overdraft prices lower, commonly 10% to 16% indicative, and requires no action to use. The balance simply goes negative and interest accrues on it daily. For a business with a genuinely fluctuating account, that automatic behaviour removes a decision point and the risk of forgetting to draw.
The barriers are the trading account and the assessment. The facility sits with the bank that holds the account, so obtaining one commonly means consolidating banking there. Two years of accounts is a common threshold, and security requirements step up as the limit rises.
Both products are typically repayable or reviewable at the lender discretion, so neither is a substitute for term funding where the need is permanent. The practical rule many New Zealand businesses arrive at is to hold the cheaper facility where they qualify for it and the faster one where they do not, rather than treating the choice as a matter of preference.
Eligibility
What NZ lenders assess on a revolving facility.
A revolving facility is assessed differently from a term loan, because the lender is underwriting a pattern rather than a single repayment schedule. The question is not whether the business can service a known weekly amount, it is whether the account behaves in a way that suggests the facility will be used as intended and cleared periodically.
Bank statements carry most of the weight. Six to twelve months is the common ask, and lenders read them for the shape of the cycle rather than the average balance: how deep the troughs go, how reliably the peaks arrive, and whether the two are moving apart over time. A business whose troughs are deepening across the period will find the assessment harder than the headline turnover suggests.
Turnover thresholds are commonly stated around $100,000 to $250,000 annually for a meaningful limit, and the limit itself is frequently set as a proportion of monthly revenue rather than as a round number. A limit sized at roughly one month of turnover is a common outcome for an established borrower.
A director guarantee is close to universal on unsecured revolving facilities in the New Zealand market, and a general security agreement over business assets is common above the smaller limit bands. Where the facility is secured by property, pricing moves toward the lower end of the band and the assessment shifts toward the security value.
Existing facilities are visible and they matter. A business already holding an overdraft and a short-term loan will find a line of credit application assessed against the total picture, and the limit offered commonly reflects the room left rather than the room requested.
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 rather than when the limit is approved, subject to the accountant's confirmation.
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