According to the Dominion Post, it may have taken just four loans, thought to be worth up to $20 million, that were not repaid on time, to stop Dominion Finance in its tracks.

Dominion Finance has stopped repaying its 9,000 investors, who are owed $276 million, and it is preparing a rescue plan.

Finance company analyst Chris Lee said Dominion Finance had been relying on repayment of the loans to maintain cash flow and meet repayments to investors as their terms fell due. But it is believed the borrowers used legal procedural methods to delay payment for a period of time.

Dominion Finance was adamant the company faced a liquidity problem and the loans would be repaid in full, and investors would be repaid, Mr Lee said.

Secured deposit investors would be partly protected by $40 million in cash raised from investors three years ago. That money and up to $35 million in shareholder funds would be used to cover losses on loans before deposit investors were affected, Mr Lee said.

The NZ Exchange is investigating whether the company had kept investors adequately informed about its situation before striking liquidity problems.