Business funding landscape change

Kiwibank is stepping out of its comfort zone and starting a new lending programme for start-ups.

While it accounted for 25% of all business lending across the country last year, it is keen to expand that market share even further by trialling StartUp+ with venture capital group Ministry of Awesome for early-stage businesses. 

StartUp+ will provide progress-based funding, structured to support startups at each stage of their journey without the usual barriers.
It is designed to address common early-stage business challenges, like inability to meet traditional borrowing criteria and perceptions of being too high risk to secure finance.

Kiwibank chief customer officer Elliot Smith, acknowledges banking has historically missed the mark for startups, but increased business lending has given the bank a good feel for what Kiwi businesses need. 

“Start-ups don’t fit into traditional lending models, and we recognised the need for a more tailored and flexible approach that genuinely supports early-stage businesses.

“This is us challenging the status quo to better serve these businesses and it’s exactly the kind of innovation that will strengthen the start-up economy,” he says.

"Start-up founders deserve financial solutions that work with them, not against them. They wear many different hats each day, and the financial decisions can sometimes feel daunting, so we’re making funding simple, easy and accessible to help them unlock their potential early."

Smith says StartUp+ will evolve alongside businesses, creating a foundation for sustainable growth so entrepreneurs can focus on what matters – “building something great”.

Businesses wanting funding will need to be accepted by the Ministry of Awesome and be involved in one of its programmes. Kiwibank will not be vetting the business nor the people running them.

If a start-up is eligible and as it reaches certain targets it will qualify for levels of finance up to a maximum of $150,000. The bank will also offer discounted lending, transactional banking support and a business banker to help out.

Kiwibank chief executive Steve Jurkovich says the key thing for the bank is to learn by doing – how does the bank make is easier for more people to get going and get the capital they need.

Lending cools

Business lending by the country’s biggest banks ANZ and Westpac has tailed off since the pandemic, while Kiwibank and ASB have expanded in this space. 

Reserve Bank figures show the major banks’ lending is now skewed towards housing.

That happened after the GFC when new standards known as Basel 3 designed to improve the regulation, supervision and risk management of the banking sector, allowed banks to use the more flexible capital rules to increase lending on housing as it didn’t need as much capital support.

An analysis by interest.co.nz shows up until 2013 when the Basel rules became effect, bank lending to businesses grew at a compound annual growth rate of +6%. In the years to January 2023 that expansion slowed to a bit over +4.5%. But since 2023, it has slowed sharply to just +1.5%.

Because of policy decisions by Westpac and ANZ to increase lending on housing and let business lending take a backseat, business lending overall has cooled. This has opened up opportunities in the market for other banks.

Agility and purpose

Ministry of Awesome - Electrify chairwoman, Marian Johnson says Kiwibank’s StartUp+ move shows what’s possible when traditional institutions evolve with the times.

“Startups face complex challenges that traditional funding models simply don’t account for.”

She says it is exciting to see the New Zealand-owned bank step up with something truly fit-for-use. “This is what happens when major institutions act with agility and purpose. It’s the kind of support that can transform our entrepreneurial ecosystem.”

StartUp+ will launch as a pilot and feedback from participating businesses will shape the future of the initiative.