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Business Finance Guarantee simplified and expanded to support COVID-19 recovery

August 21, 2020

Changes to simplify and expand the Business Finance Guarantee Scheme will allow banks to make more loans available under the Government’s 80% guarantee.

Finance Minister Grant Robertson said the Treasury and banks have been working to update the scheme based on feedback from banks and their customers. Changes include longer loan terms and a higher maximum loan amount covered by the scheme.

“The Government has put a number of measures in place to support businesses to invest as the economy recovers from the impact of the global COVID-19 pandemic. The Business Finance Guarantee encourages banks to support their customers, by offering an 80% Government guarantee over the loans issued under the scheme,” Grant Robertson said.

“We’ve been open about the fact that the original scheme has seen a lower uptake than we would have liked, with $150 million lent to 780 customers to date. The changes announced today should allow the banks to be more flexible with the scheme.

“Changes needed to be made and banks have come to the table and agreed to the modifications. Extending what the loans can be used for, including capital investment, means banks can use the scheme to help more viable businesses respond to this 1-in-100 year shock.

“We’ve also listened to concerns from businesses around requirements for a personal guarantee. While banks will still have their own lending requirements and make their own lending decisions, the Government has clarified that the Crown does not require a personal guarantee on lending made under the BFGS. The final decision is still up to individual banks, however.”

Key changes announced today include:

  • Maximum loan limit increased from $500,000 to $5 million
  • Maximum term of loan increased from three years to five years
  • Criteria for borrowing extended from liquidity support/bridging finance to enable general purpose borrowing, including for capital investment, for businesses affected by COVID-19
  • More medium-sized firms can access these loans with revenue limits extended from $80m to $200m per annum.
  • Scheme available until 31 December 2020
  • BFGS loans can be used to re-finance up to 20% of a borrower’s existing indebtedness
  • Watchlist criteria relaxed
  • Personal guarantee requirement clarified – there is no personal guarantee required by the Crown. The Crown will pay a claim in event of default where no personal guarantee has been provided
  • Discretion available for banks to act outside Supported Loan Policies, Practices, and Processes.

The Business Finance Guarantee Scheme supports the provision of bank loans to viable businesses, encouraging banks to lend where otherwise they may not, by the Government taking on the default risk for the bank of up to 80% of the loan. Borrowers are still liable and must pay the debt back, with interest, in the usual way.

The Treasury’s website, Treasury.govt.nz, has comprehensive information on the Business Finance Guarantee Scheme, including today’s changes. Businesses seeking to access the scheme should contact their bank. Participating banks are ANZ, ASB, BNZ, Heartland Bank, Kiwibank, SBS Bank, TSB, Bank of China and Westpac.


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