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Small Business Cashflow Loan Scheme

May 1, 2020

Today the Government announced a far more viable solution to small business seeking funding to sustain themselves.

Our experience thus far assisting clients through the Government Business Finance Guarantee Scheme is less than positive - And the reports in the media suggest the same. To now hear the Government are responding to that lack of support from the Banks is far more positive. Even the further impetus led yesterday by the access to prior tax payments through the Loss Offset rules leaves much to be desired in our view – with most small businesses not being able to access for a variety of reasons.

So, this is positive at least, and with reasonably clear and understandable criteria – albeit this has yet to be shorn up so we will revisit this as this scheme progresses.

The salient points around the Scheme are:

  • The Government will provide a loan of up to $100,000
  • This starts at $10,000 plus $1,800 per Full Time Equivalent employee
  • Loan is interest free if repaid within one year
  • Will attract interest at 3% for a maximum of five years if not repaid within a year – that interest we understand is retrospectively applied from day one of the loan should it not be repaid within a year
  • Repayments are not required in first two years
  • Criteria
    • Employing fewer than 50 full time equivalent employees
    • The business will have to declare it is ‘viable’
    • The loan monies are to be used solely for core business operating costs
    • Balance of the scheme criteria are as per wage subsidy application which in essence means the ability to prove a 30% or greater decline in actual or predicted revenue over a period of any month from January 2020 to June 2020 when compared to the same month last year and that this decline is related to COVID-19
  • The loan will be administered by the IRD and applications will become available from the 12th May

IMPORTANT: just as with the wage subsidy it will be important for all businesses to keep good books and records to support any future investigation in relation to these schemes – please discuss this with us if you are unsure or if you wish us to support you in the application for any of the Governments stimulus measures.

Beehive.govt.nz - Government boosts cashflow support for small businesses