An outright stake sale might not be the best fit for your company
Here are three different paths you could take.
Asset finance
A loan to pay for a particular business asset, such as a vehicle or piece of machinery.
Pros
- Interest rates can be competitive if you are able to go through a mainstream bank, and you won’t need a huge down payment.
- You may be able to own the asset outright at the end of the loan term, upgrade the asset, or return it.
Cons
- Due to interest payments, it can be expensive to use asset finance rather than cash.
- The whole asset isn’t tax deductible while you’re paying for it — only the payments in the liabilities column on your balance sheet.
Crowdfunding
Reward-based crowdfunding through websites such as Kickstarter or Pledgeme.
Pros
- Can be useful for market validation.
- Appeals can be launched by early-stage growth companies, and those working off prototypes.
Cons
- Potential intellectual property concerns if an idea is made public.
- Compelling public offerings can be time-consuming.
Peer-to-peer lending
Websites including Lending Crowd link borrowers with people willing to lend small amounts. Peer-to-peer lending platforms are relatively new and you should do your research before considering this option, including checking the latest guidance on the Financial Markets Authority website.
Pros
- Lending process is less time-consuming than a bank loan, with interest rates occasionally lower.
- Loans are unsecured — you don’t need to put up collateral.
- You are unlikely to be asked to give up equity in your business.
Cons
- Costs in addition to interest payments may apply, such as setup or platform fees
- High default interest rates (in addition to the agreed interest rates) likely apply
- Missed payments can affect your credit score.
- If you have a low credit rating, borrowing costs can be high.
Like to talk through your options? Contact the award-winning Alliott NZ team in Auckland today.