Quick answer
A business line of credit is a revolving facility with a set limit that you draw from when you need cash and repay when money comes in, usually paying only for the amount used. New Zealand trading businesses can typically access unsecured limits sized on turnover and bank statements, or larger property-secured limits. It suits recurring gaps such as GST periods, seasonal dips and slow debtors.
Key points
- Draw what you need, when you need it, up to an approved limit.
- Repay and the limit becomes available again.
- Costs usually apply mainly to the amount drawn, plus any facility fees.
- Best for recurring, short gaps rather than one large purchase.
- Type
- Revolving facility
- Unsecured limits
- Sized on turnover
- Secured limits
- Up to $5m against property
- Best for
- Recurring gaps
Some cash gaps happen once. Others happen every few weeks: a GST return every two months, a quiet stretch every winter, a big customer who always pays late. For recurring gaps, applying for a new loan each time is slow and wasteful. A business line of credit gives you a standing limit you can dip into whenever the account runs low.
How does a business line of credit work?
You’re approved for a limit — say an illustrative $80,000. You draw $20,000 to cover a GST payment. You repay it over the following weeks as sales come in. The full $80,000 is available again. You only pay for the money while it’s out, plus any fees the facility carries.
That flexibility makes a line of credit one of the most efficient tools for managing everyday cash flow in a New Zealand business.
Who benefits most from a line of credit?
| Business type | Typical recurring gap |
|---|---|
| Retail and hospitality | Stock buying ahead of busy periods; winter trading |
| Trades and construction | Materials before progress payments; retentions |
| Wholesale and import | Supplier deposits before goods land |
| Professional services | Wages before monthly client billing is paid |
| Seasonal tourism | Off-season overheads |
| Any GST-registered business | Bi-monthly or six-monthly GST payments |
How are limits set?
Unsecured lines of credit are usually sized on your trading. Lenders look at the last three to twelve months of bank statements, average deposits, consistency and existing commitments. Steady, growing deposits support a higher limit.
Property-secured lines of credit use equity in residential or commercial property, allowing larger limits — up to $5,000,000 — and often a lower cost than unsecured.
What does a line of credit cost?
Line of credit pricing usually combines several parts: interest or a fee on the amount drawn, an establishment fee, and possibly an ongoing line fee or account fee. Because the structure varies between lenders, compare the total cost for the way you’ll actually use it — how much you expect to draw, how often and for how long. We never publish rates because every facility is priced on the business, but we’ll give you real numbers to compare.
How fast can a line of credit be set up?
An unsecured line of credit can often be approved within days once bank statements are available. After that, drawing funds can be very quick — often the same day you request a draw. That’s why the best time to set one up is before you need it, while your account looks strong. Property-secured lines take a little longer to document the security, but then work the same way.
You can see what limit your business might qualify for in about 60 seconds, with no credit check at the enquiry stage.
Using a line of credit wisely
- Use it for short gaps, not permanent funding. If the balance never comes down, the business probably needs a term loan or a restructure.
- Repay promptly when money lands, so the limit is ready for next time.
- Don’t confuse it with income. An available limit isn’t profit.
- Keep tax money separate. Drawing to pay GST is fine; drawing because GST money was spent elsewhere is a warning sign.
- Review the limit annually as the business grows.
An illustrative example
An illustrative Dunedin outdoor gear retailer buys winter stock in March and April, sells it through June to August, and files GST two-monthly. A line of credit lets the owner fund stock in autumn, cover the larger GST payments after winter, and clear the balance by spring. The same limit is used again the following year, avoiding a new application every season.
Line of credit or invoice finance?
If your gaps come mainly from customers paying slowly, invoice finance may suit better because it grows automatically as your invoices grow. If your gaps come from a mix of stock, tax and seasonality, a line of credit is more flexible because it isn’t tied to specific invoices. Some businesses use both: invoice finance for the debtor book and a line of credit for everything else.
A quick checklist before you enquire about business line of credit
Write down the amount you need and exactly what it will pay for. Note the date the money is needed and the date you expect to repay it, and name where that repayment will come from. Download your last three to six months of business bank statements, check that your GST and PAYE filings are up to date, and have your NZBN and photo ID handy. If you’re offering property, jot down its address, a realistic value and what’s still owing on it. Ten minutes spent on this list before the first call can save days later, because the person helping you can go straight to the options that genuinely fit rather than chasing missing details.
Set up a limit before the next gap
A line of credit works best when it’s in place ahead of time. Tell us how your business trades and where the recurring gaps fall. There’s no credit check when you first enquire, your details are kept with us rather than shopped around lenders, and a real person will help you size a sensible limit.
Accurate answers on the form — your turnover, time trading and any property — help us set the right limit the first time. Ask about a line of credit.
Frequently asked questions
How is a line of credit different from a business loan?
A business loan pays out a lump sum once, repaid over a set term. A line of credit gives you a limit you can draw from and repay repeatedly, so it adapts to changing needs.
How is the limit decided?
For unsecured lines of credit, lenders usually look at your average monthly deposits, how consistent they are and your existing commitments. For secured lines, the equity in the property is the main factor.
Do I pay anything if I don't draw on it?
Some facilities charge an establishment fee, a line fee or a monthly account fee even when unused. Others charge mainly on the amount drawn. Check the fee structure before you sign.
Is a line of credit the same as a bank overdraft?
They work similarly. Overdrafts are attached to your bank account; lines of credit from non-bank lenders sit separately and you transfer funds in when needed. Non-bank lines are often easier to obtain if your bank has declined an overdraft.