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Business Finance Guarantee Scheme

April 16, 2020

The Government and the banks are implementing a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses, to protect jobs and support the economy. The Crown, in partnership with participating approved banks, will support targeted new loans (including increases to existing limits) to eligible businesses, as a response to difficulties caused by COVID-19.

Under the scheme, businesses with annual revenue between $250,000 and $80 million can apply to their banks for loans up to $500,000, for up to three years. The scheme will offer a total of $6.25 billion in loans to New Zealand businesses.

The Government is guaranteeing 80% of the risk, while the banks are covering the remaining 20%. A normal lending process will be followed by the banks, which will make the lending decisions. Further details can be found on the banks' websites.

More information on the announcement can be found at Beehive.govt.nz.

Business Finance Guarantee – applications open (external link) — Beehive.govt.nz

CG Note:

We’ve had a look at one bank website (Westpac) and they will require the following if you want to apply for a ‘Business Support Loan’

  • Last financial statements for the business (profit and loss and balance sheet)
  • A copy of your IRD tax summary
  • A cash flow forecast detailing income and essential expenditure (minimum 3 months)
  • A personal statement of position
  • A personal income verification if applicable (e.g. IR3 or payslip)

We assume that other banks will also ask for this information, so if you are going to your bank for funding under this scheme, call us first to discuss so we can get Financial documents ready.

FAQ Business Finance Guarantee Scheme

I own a business – am I eligible?

To be eligible to apply for loans under the scheme your business must be New Zealand-based and with an annual turnover between $250,000 and $80,000,000. If you or your business was on your bank’s credit watch list at the outset of the COVID-19 crisis, you will not be eligible for a loan under the scheme. See also Excluded Activities below.

When will the scheme be available?

Customers are able to apply to the banks now. Details are on each individual bank's website.

How do I apply?

Talk to your bank to discuss your financing needs. They will advise whether your financing can be supported under the Scheme. Details are on the banks’ websites.

Who decides if my business qualifies for the loan?

Your bank will decide whether your financing can be supported under the Scheme. To see if you qualify for a loan under the scheme, your bank will follow its normal credit assessment process. This process will be modified to enable the bank to give effect to the scheme and to allow the bank to look through the economic cycle to sensibly take account of the uncertainty of the current economic conditions caused by COVID-19.

How much can I borrow?

The facility limit for an individual loan will be a maximum of $500,000. However, the maximum amount your bank is prepared to lend to you will be determined by your bank.

What can loans be used for?

The loans are intended to provide for businesses’ current and upcoming operating cash flow needs, including things like rent and staff expenses.

What are the interest rates for the loans?

Interest rates will be determined by the banks under their normal lending criteria.

What is the criteria for the loan?

Supported loans will be provided by banks to businesses that have urgent liquidity and bridging finance requirements caused by disruption to business as a result of COVID-19.

What will the loans not fund?

A Supported Loan will not be available to fund:

  • Capital assets/projects other than business as usual expenditure which does not exceed 5% of the principal amount of the loan
  • Dividends to be distributed outside the Borrower’s guaranteeing group
  • Re-financing existing debt advanced before March 16th
  • On-lending outside the Borrower’s guaranteeing group, or
  • Excluded Activities (see below).

Activities excluded from the Loan Scheme:

  • Property development and property investment
  • Manufacture of cluster munitions civilian automatic, semi-automatic firearms, magazines or parts and anti-personnel mines
  • Manufacture or testing of nuclear explosive devices (NEDs)
  • Manufacture of tobacco
  • Processing of whale meat
  • Recreational cannabis
  • Agriculture (but for the avoidance of doubt, agriculture doesn't include horticulture, viticulture, aquaculture or services to agriculture)
  • Any other activity notified by the Crown in writing to the Approved Banks, with the effect from the date of that notification (or such later date as set out in the notification).

How long do I have to repay the loan?

Supported loans are limited to a maximum term of three years. However, the exact terms of individual loans will be determined by each bank.

What happens if I am unable to repay the loan?

Borrowers are fully responsible for repaying the loans under the scheme. If Borrowers default on payments, banks will follow their usual default processes.

Which banks are participating?

All New Zealand registered banks are eligible to apply to join the scheme. Banks participating in the scheme include ANZ, ASB, BNZ, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB and Westpac.

Can I apply directly to the Government for a loan?

No. Applications for a loan under the scheme must be made to a bank that is participating in the scheme.

What if my bank declines my application – where else can I get support?

The Government has introduced a range of measures to support businesses and individuals. More information on available support can be found on the COVID19.govt.nz website.Financial support (external link) — COVID19.govt.nz

What is the time period for applying for a Supported Loan?

Loans will be available under the scheme until 30 September 2020.

If customers default, how much of the loan amount is paid to the banks?

The Crown will pay 80% of any loss incurred by a bank on a loan it makes under the scheme, after the bank has completed its normal enforcement procedures.

Is the scheme available through other lending institutions?

No. Only registered banks will be able to be part of this scheme.

How will we ensure banks are complying with the Terms?

The Treasury will have oversight of the compliance of participating banks through a robust monitoring and reporting process.