Small businesses still confident about investing, says specialist lender

Source: Radio New Zealand

Small businesses are still borrowing and investing, despite the Middle East conflict affecting the economy, according to a specialist lender.

Prospa says loan demand flattened slightly in March as rising fuel prices dented confidence, but overall borrowing was still robust – especially for equipment purchases and for taking advantage of government depreciation allowances before the financial year closes tomorrow.

Managing director Adrienne Begbie said firms were also drawing on lines of credit to boost inventory levels, partly as a hedge against possible transport disruptions, and partly to manage future cashflow pressures.

“People are borrowing off our line‑of‑credit product – you’re only paying interest when you’re using it – so it’s more of a ‘just‑in‑case I need it’ scenario,” she said.

Begbie said Prospa’s approval‑to‑settlement metric – the proportion of businesses actually drawing down approved credit – was sitting above 80 percent, levels she said suggested businesses were confident about investing.

She said arrears on business loans had dropped to low levels, and Prospa’s data showed most borrowers were profitable.

After enduring several crises in recent years, Begbie said small businesses seemed to be taking a more pragmatic view this time around, accepting they can not control global events and instead “looking at themselves and getting on with it”.

These trends suggested small businesses were not battening down the hatches during the fuel crisis.

Begbie said the country needed to be careful not to talk itself into a recession.

“There’s still a lot of activity out there, and I worry the doom‑and‑gloom rhetoric is pulling people down,” she says.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand