Below is a brief summary of what you need to know about this scheme:
- Up to $6.25 billion of business loans to small and medium enterprise (SME) businesses in New Zealand is to be guaranteed by the government. We note that the government is guaranteeing 80% of the money whilst the residual is carried by the banks.
- There are 9 banks included in this scheme: ANZ, BNZ, ASB, Westpac, Kiwibank, heartland Bank, TSB, HSBC, and SBS.
- The above-mentioned banks are currently taking applications under the scheme, and have indicated that the timeframe will be approximately 10 days from the date of your application.
- For businesses with an annual income between $250,0-00 and $80 million, the maximum loan amount is $500,000. The term of the loan is 3 years. It is expected that interest rates will be materially lower than historic bank rates. Applicable interest rates will be calculated on a case-by-case basis.
- Currently applications for loans under the scheme should be made through your normal channels, including your broker or bank manager, whoever normally completes these applications for you.
- These loans are to accommodate operational costs or other costs and factors relating to COVID-19 lockdown and its resulting impacts on your business. Loans for growth, acquisition, or capital expenditure funding will not be considered as part of this scheme. Neither will agriculture, property development, and other property investments.
- At this stage, banks have not published any guidance regarding loan criteria and it is unlikely that they will. However it is likely that assessment will be based on the business being profitable and their pre-COVID-19 performance. It is important that as part of this process business owners have a clear idea of what your business will look like post-COVID-19 and ensure that your business can also meet additional loan repayments along with all other obligations that come with the nature of your business. At this stage the banks have requested that businesses have a plan or some thinking around how they intend to last the crisis and proceed afterwards, as well as providing financial projections.
As with any lending, it’s important to consider your position and your ability to meet these debts. Get in contact with us today to discuss any risks and requirements of you and your business during this time.