Business Finance Survey
The Business Finance Survey was sponsored by the Ministry of Economic Development (MED). It is the first survey of its type to be conducted in New Zealand, and was developed by Statistics New Zealand in collaboration with MED.
The core objective of the Business Finance Survey is to provide information on the capital structure of businesses in New Zealand, the sources of finance they use and their recent financing experiences. A sample of businesses with between 1 and 500 employees in a wide selection of industries were surveyed. Survey participants were asked to include details of all requests for finance, whether fully approved, partially approved, declined or withdrawn.
This is the first release of Business Finance Survey data by Statistics New Zealand. A more detailed Business Finance Survey report will be published jointly by Statistics New Zealand and MED in June 2005.
Guide to interpreting the data
The following is a summary of the factors to consider when assessing Business Finance Survey results. A full technical description of the survey is contained in the Technical Notes.
Types of finance
For the Business Finance Survey, finance is defined as either of the following:
Debt finance: This includes any finance that the business must repay (for example overdrafts, credit cards, and convertible debt).
Equity finance: This includes additional investment from existing owners of the business, and any finance received in exchange for a share in the ownership of the business.
Limitations of the data
The results from this survey are subject to statistical error (sampling and non-sampling). Please refer to the Technical Notes for further details.
Given the nature of the data collected, there are additional non-statistical limitations on the level of accuracy that can be expected from the survey. New businesses or those which have recently begun operations are of particular interest for this survey, but most of these businesses do not yet have a full set of annual accounts. Also, many smaller businesses are not in possession of full and/or up to date accounts, and may or may not use external accountants. In addition, for businesses of any size or age, records may not be kept in the exact form required for the survey, and some estimation may be required in these cases.
Finance requested
Results from the Business Finance Survey indicate that 36 percent of New Zealand businesses requested additional finance over the 12 month period to August 2004.
Businesses during this period were much more likely to seek additional debt financing (34 percent) than equity financing (6 percent).
The proportion of businesses requesting debt finance was lower for small businesses. Only 29 percent of businesses with between 1 and 5 employees requested debt finance, whereas over 40 percent of larger businesses sought debt finance.
Debt finance was also more commonly sought than equity finance by businesses of all ages. However, younger businesses (less than three years old) were more likely to seek equity finance (9 percent) than businesses over three years old (4 percent).
Debt and equity finance received
This survey focused on the characteristics of businesses' most recent financing requests within the 12 months to August 2004. The survey results indicate that the vast majority of finance requests made by New Zealand businesses result in finance being obtained. Ninety percent of finance requests made by businesses resulted in either some or all of the amount sought being received.
The proportions of successful requests were similar for both debt finance and equity finance requests, at 90 percent and 83 percent, respectively.
There was some variation in success rates across businesses in different industries surveyed. Success rates for debt finance requests were similar across all industries. However, requests for equity finance ranged from 63 percent in the wholesale trade industry, to 100 percent for the communication services industry.
Sources of finance
There is a range of available sources for businesses to approach for additional finance. Such finance may be sought and received from one or more of these sources.
For businesses which received additional debt financing, the most common source was banks, which were a source of debt finance for 72 percent of businesses. Finance companies (including hire purchase or lending companies) were the next most common source and were used by 26 percent of businesses. All other sources of debt finance were much less common. These other sources include: trade creditors or suppliers; existing owners; friends and family of existing owners; other individuals; other businesses; and any other sources. Each of these was the source of debt finance received for less than 5 percent of businesses when viewed individually. When viewed as a group, they were the source of finance for only 12 percent of businesses.
A similar picture of dominance is evident with sources of equity finance. By far the most common source of additional equity finance received were individuals principally in control of the business, who were a source of equity finance for 83 percent of businesses. Friends or family of those individuals were the next most common source and were used by 11 percent of businesses. Other sources of equity finance were less common. These other sources include: employees; other individuals; parent companies; venture capital/private equity funds; other businesses; and any other sources. Each of these others was the source of equity received for less than 5 percent of businesses when viewed individually, although there was some variation in the prevalence of these other sources across businesses in different industries. When viewed as a group, these others were the source of finance for 17 percent of businesses.
Total debt and equity
While the results for recent financing requests show that requests for debt finance were much more prevalent than those for equity finance, the ratio between these types of finance is different when the total dollar values of debt and equity are considered.
Survey results show that New Zealand businesses had $36.1 billion in debt outstanding at the end of their last financial year. The amount of equity in New Zealand businesses over the corresponding period was $30.6 billion. This represents a debt to equity ratio of 1.18.
These results are provisional and it is expected that finalised results will be published in the detailed Business Finance Survey report in June 2005.
For technical information contact:
Hamish Hill or Dan Martin
Wellington 04 931 4600
Email: info@stats.govt.nz