Borrowing is playing a big part in the NZ economy’s rebound, with businesses that put everything on hold in the pandemic’s initial stages now gunning for growth.

BNZ’s general manager of business lending and growth sectors, Karna Luke, says the bank is seeing companies taking the opportunity to prepare for growth.

Examples include:

  • Financing new machinery and plant ahead of expected demand
  • Consolidating business of those who are exiting the market
  • Buying and holding extra stock to offset the impacts of supply chain delays
  • Pivoting to reach additional markets by introducing new technology

“When covid first hit, a lot of people put everything on hold. We’re through that now. People see we can continue to trade and live life and manage in a new normal.

“Businesses borrow to gear up for what’s coming, while trying to capitalise on the impact of government spending. We’re seeing large investments in capital items, such as plant and machinery.

“But also if you look at the supply chain issue, a ship stranded in a canal for a few days has bottlenecked everyone for four months.”

An example is high demand for building supplies, with some firms responding by hiring warehouses and stockpiling materials.

Thirdly, businesses are borrowing to introduce new technology that’ll help them find new markets for their products or to source products.

“Everyone has seen the power of ecommerce and digital platforms. We’re finding people are investing around tech, but that tech doesn’t replace the value of face to face. We’re seeing our customers returning to engage face to face either through their offices or in meeting engagements.

“It’s all about embracing ecommerce while keeping the opportunity to physically put customers and products together,” says Luke.

Particular areas of current growth are trade, construction, export, agriculture and dairy.

“Businesses can recognise growth in business by either borrowing or bringing in investors. There’s a point where you may decide to borrow because you know your business is on to a good thing and you retain ownership.

“If you go to a venture capital firm, you need to consider the equity slice of that. Those are the decisions for businesses to consider.

“If you decide leveraging up and borrowing is what’s right for your business, then you retain the entire business, that’s all yours.”

Borrowing can also enable payback flexibility – companies choose when to draw down a loan and often have a say in when to pay it back.

Luke says the bank has been able to help some customers find new markets and come back even more strongly than before covid. “When our customers say, ‘Our revenue is down 40%’, we look to link our customers with new trade or revenue lines. 

“We had a beverage company that was affected when China closed. We worked with them to identify new opportunities and reset their focus, and found two new markets in Europe and the US. Now China is back online, their revenue is up 140%, better than before covid.”

BNZ’s growth mantra has developed lending into a wrap-around service. “We have a growth markets team of bankers on the ground. We run a team that hits each of our target sectors, which include technology, health, Māori business, export, Asia focus and professionals.

“Those people who run these sectors are industry experts on what’s happening. We’re connected to Callaghan and NZTE. We’re active in the B2B space. We connect our customers with relevant key areas in which their products and services will grow."

While pre-covid, BNZ could take customers on trips to China, Japan and Europe to meet potential customers and connect with trade hubs, these activities were moved online when the pandemic hit.

“We’ve set up B2B market events, enabling NZ businesses to share with others what we’ve all learned, and turned our small business learning and networking Connect events into webinars."

Luke says BNZ’s other difference is specialised solutions. “When we think of borrowing, it's not just debt. We have products that help people with trade. We have asset finance, and invoicing finance to help people when they don’t have enough balance sheet liquidity. Our markets team helps people with foreign exchange. It’s not unusual to see customers with a range of different products to help fulfil their needs.”

Luke’s tips for surviving covid differ according to whether a business is a startup or established. “If you are a startup you might focus on managing costs, whereas a well-established company might look at diversifying into different markets.”

Above all, he advises companies to prepare for change.

“You need to be thinking, What does viability look like? What would you do if 40% dropped out of the market? How would you manage costs? What would you need to keep going?

“People think ‘I’ve got my business; I’ll just manage costs’. But what happens if the market changes?”

Business owners should continually talk to their bankers, accountants and advisors. “The number one thing is talking and connecting with networks, find out where the opportunities are, don’t wait for them.”

Case study: Modica Group

NZ-based Modica Group provides a highly sought-after secure messaging platform for banking, government and health sectors. Modica added its first employee in 2001, but last year alone went from 45 to 70 staff and still had 20 vacancies it did not fill. This year it is looking for 60 staff, and has invested in artificial intelligence (AI) and other acquisitions. With the company borrowing to grow and make further acquisitions, it has already seen its revenue triple over the past five years.

Any views expressed in this article are the personal views of Karna Luke and do not necessarily represent the views of BNZ, or its related entities.

This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser. Neither BNZ nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation or omission, whether negligent or otherwise, contained in this article.

Lending criteria, terms and fees apply to the products and services mentioned in this article.

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