Which funding source first? Putting your stack in order

Once you know the size of your funding gap, the next question is which pieces to use, and in what order. Think of it like building a mix in the studio: you lay down the parts you already have before you bring in session players, and you add the expensive orchestra last, only if the track needs it. In funding terms, that means starting with what’s cheapest and most specific, and finishing with what’s most expensive and most general.

What is the usual order?

Order	Piece	Why it comes here
1	Internal cash: overdue debtors, idle assets, surplus stock	Money you already own; no finance cost
2	Owner cash above a safe buffer	No repayments, but limited and precious
3	Supplier terms	Often free if paid on time
4	Customer deposits and progress billing	Customers fund the work they’ve ordered
5	Landlord contributions, vendor finance, grants	Situation-specific; often cheap
6	Asset- and invoice-linked finance	Secured on the thing being funded; keeps other security free
7	General loans (unsecured or cash-flow)	Flexible; priced for the risk
8	Property-secured funding	Larger amounts, longer terms; your property at risk
9	Equity	No repayments; permanent cost
Throughout	A line of credit buffer	Smooths timing gaps between the others

This isn’t a rigid rule. A business with no property skips step 8; a goal with a clear asset may jump straight to step 6. But as a default, it keeps costs and risk in the right place.

Why does internal cash come first?

Because it’s the only funding with no cost and no strings. business.govt.nz notes that the most critical mistake in getting paid is waiting too long before getting in touch with debtors. Collecting overdue invoices, selling gear you don’t use and clearing stock that isn’t moving can release meaningful cash before anyone else is involved. The guide on freeing up cash before borrowing is the checklist for this step.

Why supplier and customer money next?

Suppliers and customers already have a relationship with you and an interest in the goal going well. Extra supplier terms and customer deposits usually cost little or nothing in direct charges. Their limit is that they only stretch so far — a supplier only extends credit on what it sells; customers only pay deposits on work they’ve ordered.

Why put asset- and invoice-linked finance before general loans?

Because they’re secured on the specific thing being funded. Equipment finance sits on the equipment; invoice funding sits on the invoices. That keeps your other security — property, a general security agreement — free for later goals. It also means one problem doesn’t put everything at risk.

Watch the interaction: a general security agreement registered on the PPSR can cover all your assets, including equipment and debtors. The Companies Office notes registration gives priority over later or unregistered interests. If you already have a lender with general security, check before adding asset or invoice finance. The guide on who ranks first when you mix funding explains it.

Where do general loans and property security fit?

Near the end — filling the gap the earlier pieces couldn’t. By the time you reach them, the ask should be smaller, better defined and easier to approve. An unsecured or cash-flow option suits a trading business with steady statements; property-secured funding suits larger or longer gaps. If you’ve reached this step and want a real person to look at the gap, start a 60-second enquiry.

Why is equity last?

Because it’s the most expensive piece if the goal succeeds: you give away a share of every future dollar of profit and value. It earns its place when the goal is too large, uncertain or slow for debt to be safe. See partner or investor.

Illustrative ordering: a Hawke’s Bay wine distributor

Illustrative only; describes no real business.

A distributor needs $200,000 to take on an exclusive import agency.

1. Debtors: chasing overdue accounts releases $22,000.
2. Idle stock: clearing old vintages releases $15,000.
3. Owner cash: $30,000.
4. Supplier terms: the overseas producer agrees to 90 days on the first two shipments: $60,000.
5. Customer pre-orders from restaurants: $18,000.
6. A line of credit for duty, freight and GST timing.
7. A term loan of $55,000 for warehouse fit-out and marketing.

The term loan ends up covering about a quarter of the goal.

How do you know when to stop adding pieces?

Stop when the remaining gap is covered with a buffer, when the next piece costs more than the goal is worth, or when the stack becomes too complex to manage. Every extra facility is more admin, more reporting and more potential for clashing security. Three or four well-chosen pieces usually beat seven. Use the funding remixer to test combinations, size the gap properly, and read when a loan is the right piece before you finalise.

Does the order change for different businesses?

The principle stays the same, but the emphasis shifts:

• Trades and contractors usually lean hardest on progress billing, supplier terms on materials and invoice funding.
• Retailers rely more on supplier terms, seasonal dating and clearing slow stock.
• Hospitality often uses landlord incentives, equipment finance and pre-sales such as vouchers and bookings.
• Professional services focus on debtor collection, retainers and, for larger moves, property-secured funding.
• Manufacturers mix equipment finance, supplier terms on raw materials and invoice funding on trade customers.

Whatever the industry, the logic is the same: use money you already have or can earn early before you pay someone else for it.

Ready to fund the last piece in the order?

When the cheaper pieces have done their work, the gap that remains is the one worth funding. Tell us the goal and what’s left. There’s no credit check to start, your enquiry stays with a real person rather than being pushed to a list of lenders, and we’ll talk through which piece fits. Please be accurate on the form about the pieces you’ve already lined up — it helps us size the right facility first time.