Quick answer
Fast-growing businesses often run short of cash because new sales need stock, staff and materials paid for before customers pay. This growth squeeze is common in healthy New Zealand businesses. It can be funded with a working capital loan, a line of credit, invoice finance or property-secured lending, sized so the business can keep taking on work without missing its own obligations.
Key points
- Growth uses cash before it produces cash.
- The faster you grow, the more working capital you need.
- Profitable businesses can still run out of money while growing.
- Funding growth works best with a clear forecast and a sensible limit.
- Common cause
- Costs paid before customers pay
- Tools
- Line of credit, working capital, invoice finance
- Secured
- $20k – $5m
- Enquiry
- 60 seconds
It sounds like a contradiction: the business is busier than ever, the order book is full, and yet the bank account is emptier than it was a year ago. This is one of the most common situations Kiwi owners describe, and it has a name — the growth cash squeeze.
Why does growth drain cash?
Imagine an illustrative Hamilton automotive workshop that takes on a fleet maintenance contract. To deliver it, the owner hires a mechanic, buys more parts stock and extends hours. All of those costs start immediately. The fleet client pays monthly in arrears on 20th-of-the-month terms. For six or seven weeks, the workshop is funding the contract from its own pocket.
Now imagine the workshop wins a second contract before the first has paid. The gap doubles. Every new piece of work needs cash before it returns cash. That’s the squeeze.
How do I measure my growth gap?
A simple calculation:
- Work out your monthly costs to deliver new work — wages, materials, overheads.
- Count how many weeks pass between spending on a job and getting paid.
- Multiply the weekly cost by that number of weeks.
| Monthly cost of new work | Weeks until paid | Approximate gap |
|---|---|---|
| $20,000 | 6 | $30,000 |
| $50,000 | 8 | $100,000 |
| $100,000 | 10 | $250,000 |
These figures are illustrative only. Our Cash Flow Gap & Fast Loan Matcher lets you enter your own numbers.
What funding grows with the business?
Line of credit. A limit that you draw and repay, reviewed upwards as you grow.
Invoice finance. The facility rises automatically as your invoices increase, because it’s tied to what customers owe you.
Working capital loan. A lump sum to fund a specific growth step, such as a new contract or location.
Property-secured lending. For larger growth steps, equity in property can unlock $20,000 to $5,000,000.
What do lenders look for in a growing business?
- Rising deposits in the bank statements — evidence the growth is real
- Profitability, at least at the gross margin level
- Obligations being met — wages, GST, PAYE and suppliers paid on time
- A plan, even a simple cash flow forecast for the next three months
If you’re not sure where you stand, run a quick check on what your business might qualify for. Enquiring won’t touch your credit file.
How do I grow without running out of money?
- Price for your payment terms. If a client pays in 60 days, your price should reflect that.
- Ask for deposits on larger jobs and progress payments on long ones.
- Forecast cash, not just profit. Our guide to building a 13-week cash flow forecast shows how.
- Set up funding before you need it. Approval is easiest while the account looks strong.
- Grow at a pace you can fund. Sometimes saying “not yet” is the right call.
Growth and tax: the delayed hit
Growth also lifts your tax bills — but later. Higher sales mean bigger GST returns a period or two after the work is done, and a stronger year means larger provisional tax instalments the following year. Many owners fund the growth successfully, then get caught by the tax that follows. See GST bill funding and provisional tax funding for how to plan for both.
Which growth steps suit which kind of funding?
Not every growth step should be funded the same way. Opening a second location is a one-off investment with a long payback, so it suits a longer term — possibly secured against property — rather than a short facility that has to be cleared within months. Taking on a larger customer with slow terms is a cycle problem that repeats every month, so a revolving limit or invoice finance fits better. Buying a vehicle, machine or fit-out is an asset purchase, and equipment finance spreads the cost over the asset’s working life while leaving cash free for wages and stock.
Mixing these up is where growing businesses get into trouble. Using a short-term loan to fund a fit-out means heavy repayments before the new site has earned anything. Using a long loan to fund a temporary debtor gap means paying for money you no longer need. When we talk through your situation, the first question is always which kind of growth you’re funding, because the structure matters as much as the amount.
Warning signs that growth is outpacing the business
- GST and PAYE are being paid late to keep up with wages and suppliers.
- Supplier accounts are on stop or creeping well past terms.
- Quality or delivery is slipping because the team is stretched.
- The owner is funding the gap personally with credit cards or a home loan top-up nobody planned.
- Margins are thinning because new work was priced to win rather than to profit.
If several of these sound familiar, it’s worth pausing to look at pricing and capacity before adding funding. Funding solves timing; it doesn’t solve work that doesn’t pay.
Keep saying yes to good work
If growth is outrunning your cash, that’s a good problem — but it still needs solving. Tell us what you’re growing into and roughly how big the gap is. You won’t face a credit check to enquire, your information isn’t scattered among lenders, and a real person will help you choose the structure that grows with you.
Accurate answers on the form help us match you properly the first time. Fund your next stage of growth.
Frequently asked questions
Why is my profitable business always short of cash?
Profit is recorded when you make a sale; cash arrives when the customer pays. If you're growing, each month's new sales need costs paid upfront while last month's sales are still being collected, so the cash gap widens as you grow.
Is borrowing to grow a good idea?
It can be, when the growth is profitable and the repayment source is clear. Borrowing to fund work that loses money, or growth you can't deliver, is risky.
What's the best funding for a growing business?
Often a revolving line of credit or invoice finance, because both grow with the business. A lump-sum loan suits a specific step, such as opening a new location or buying a vehicle.
Do lenders like growing businesses?
Generally yes, provided the growth shows up in the bank statements and the business is meeting its obligations. Rapid growth with missed tax payments raises questions.