Why NZ businesses commonly borrow.

Indirectly, and materially. The purpose determines which products are available, and the product determines the rate band. Borrowing to buy a machine opens asset finance at an indicative 8% to 16%; borrowing for general working capital commonly lands in unsecured lending at 12% to 25%. Lenders also read purpose as a risk signal, and a clearly productive purpose with an identifiable repayment path generally assesses better than an unspecified one.

Most facilities specify allowable purposes in the contract and treat the funds as general business funding once drawn, without monitoring each transaction. Asset finance is the exception: funds commonly pay the supplier directly and the lender registers a security interest over the specific asset. Where a contract restricts purposes, the agreement is the authoritative reference on what is permitted.

Yes, and a general-purpose term loan is commonly used exactly that way. The trade-off is that mixed-purpose borrowing rarely qualifies for asset-secured pricing, because no single asset supports the whole facility. Where one component is a substantial asset purchase, splitting it into asset finance and funding the remainder separately commonly costs less overall than one blended facility.

That depends on what the delay costs, which is a question only the business can answer. The comparison worth running is the interest cost of borrowing against the margin, contract or capacity that waiting forgoes. Where the funded activity generates more than the finance costs, the arithmetic favours borrowing; where the return is uncertain or unmeasured, self-funding carries no repayment obligation if the expected benefit does not arrive.

Refinancing existing debt without a change in the underlying position, funding a loss, buying out a shareholder in a business without strong earnings, and speculative activity are all commonly declined or priced at the upper end. Purposes with a clear productive output and an identifiable repayment source, such as equipment, stock against confirmed orders, or a contract mobilisation, are generally the most straightforward.

Provisional tax has a New Zealand-specific alternative in tax pooling, where approved providers allow a business to buy tax at a date already passed, commonly at a cost below both unsecured lending and IRD use-of-money interest. That comparison is worth running before a general working capital facility is taken for a tax bill. The accountant is the right person to confirm which route suits a specific tax position.