Leverage Your Business to Build Wealth
“If you are a Kiwi business owner, you could be sitting on the key to your next big investment — and it’s not your home, it’s your business.”
For many Kiwi business owners, your business is your biggest asset. It is the result of years of hard work, risk and reinvestment. It is not only a source of income, but also something you can use to grow your asset base. This could mean funding expansion, acquiring property or diversifying your investments.
The key is to do it strategically, with the right lending structures and a clear plan to manage risk.
1. Reshape Your Cash Flow to Unlock Growth
Growth often needs upfront spending on stock, marketing, staff, or equipment, but business cash flow can be unpredictable. Matching your lending terms to your business cycle and assets can release capital without creating pressure.
Example: A small Hawke’s Bay business was struggling with loan facilities that were not fit for purpose. By restructuring, they freed up $10,000 a month, giving them the confidence and capital to expand.
2. Fund Expansion or Acquisition
With a strong trading history, you may be able to borrow against your business’s profitability or assets. That could mean opening a new location, investing in machinery or buying another business to fast-track growth. In the right circumstances, lenders may offer up to 100% funding for acquisitions, especially where the purchase adds customers, capability or profit.
3. Invest in Property
Many established businesses can secure lending for residential or commercial property without using personal funds. This is sometimes called cash flow lending.
Example: One local business bought its own premises with 100% funding. This turned rent payments into equity and added long-term capital growth to their portfolio without using the family home.
4. Create Liquidity for Shareholders
If your business has low debt and strong equity, you may be able to release funds to pay out shareholders. This can help reduce personal debt or free up capital for other investments.
Example: A Hawke’s Bay business with over 70% equity used its balance sheet to secure funding. This allowed them to pay out shareholders and clear a personal mortgage, helping the owners become freehold on their homes faster.
5. Fund Succession
When key staff or managers want to buy in but lack the capital, the business itself can sometimes help fund the purchase. Lenders often take comfort from the business’s track record and may provide unsecured lending to enable the buy-in. This can smooth ownership transition and reward loyalty.
6. Diversify into Other Asset Classes
Profits from your business can be the gateway to investments like property, shares or managed funds. This creates multiple income streams and builds wealth outside your core business. Always ensure the expected returns outweigh borrowing costs, and get independent advice.
The Bottom Line
Your business can be more than your day job. It can be a powerful wealth-building tool. The right structure can set you up for sustainable growth and personal financial freedom. The wrong one can create unnecessary risk.
"It’s about turning business success into personal financial security without putting your livelihood at risk."
Before taking action, work with an independent adviser to review your position and make sure any move aligns with your circumstances. Done well, leveraging your business could be the smartest decision you ever make.
Want to explore this further?
Get in touch with the team at Vesta to learn more about leverage and building your wealth.
This article is for educational purposes only and is not personalised financial advice. Speak to an adviser about your own position.