Question :
Kia Ora,I own an existing online marketing business that is just pulling small amounts of residual income via Paypal after not operating it since the end of 2018.I have drawn up a business plan for a new business to service the rural community in NZ (mobile repairs, very low overheads etc).For this I am wondering if the best route to go is ($40k start up costs)1 – Register a whole new business, apply for MSD start up help and wage underwrite scheme as a new business and get the remaining finance ($30k) from bank or business lending.2 – Operate under the existing business, forget trying the MSD side of things and either using existing business to get a government backed loan and just go all in as a brand under that business.3 – Register a new business, try get MSD start up, get government backed loan on existing business and that business lend to the new one or become a shareholder in the new one (non controlling interest)At the moment the current position of the start up idea, we have more than enough guaranteed work to start with to easily cover my wages as a sole employee. The existing business will make a couple thousand dollars a month through other side projects over summer too however its cashflow has not been any more than $2k/m for the last 12 months so not the strongest records for it to go applying for finance either.Any advice or nudges in the right direction would be hugely appreciated :)Thank you.

Question submitted 18/10/20 @ 03:05pm
Industry: Funding & Finance
  • Up

    Hi there – first thing I consider is really the needs and problems you are looking to solve of the customers in your target market, cash in the form of revenue generated from solving their problems is the best form of validation for your business.

    If you need ‘capital’ to open up the market and / or create some assets – then yes, where is the source or best source to get this from (other than customers) – MSD is as you know, a rule driven organisation, if you fit the criteria then you can get some funding, albeit it takes some time from what I know – this programme is if you already on a benefit – https://www.workandincome.govt.nz/products/a-z-benefits/self-employment-start-up-payment.html – but it is up to $10k startup funding, not sure there are other schemes at higher levels?

    There is the small business IRD loan, and then there are commercial loans including the business finance guarantee scheme – but the decisions are based on ‘commercial lending basis’ and I would think they will struggle with funding a startup (other than the IRD loan).

    I know this does not really answer your structure questions – my over-riding thought is focus on customers, and their needs – and if you have to compromise to get funding from other sources, just make sure it is not going to completely distract you from your market.


    What Andy said and, with regard to the structure options, in this situation I’d recommend having as few registrations and trading structures as possible, noting that MSD funding does not require you to have a new business registration to apply. You only need to be starting a new business, or seeking support for an existing business. These can be satisfied under your existing registration. So option 2 above, but do approach MSD. Other funding lines could also be explored but, as per Andy, you could defer draw down until you’ve got positive market validation. All the best.

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