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Government offers Interest free loans for SMEs from May 12

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Wellington, May 2, 2020

Ministers Stuart Nash and Grant Robertson (INL File Picture)

The Government will provide interest free loans to Small and Medium Businesses (SMEs) impacted by the Covid-19 economic shock.

Finance Minister Grant Robertson and Small Business Minister Stuart Nash announced the new initiative to support these businesses to meet their immediate cashflow needs and fixed costs.

The scheme will be implemented from May 12, 2020.

The initiative, called, ‘Small Business Cashflow Loan Scheme’ will provide up to $100,000 to companies employing 50 or fewer full time equivalent employees.

Mr Robertson said that the support extended by commercial banks to SMEs is neither meeting the needs nor expectations of the government.

The loan terms

“The government has therefore decided to provide $100,000 to every firm and in addition $1800 per equivalent full time employee. Loans will be interest free if they are paid back within a year. An interest rate at 3% for a maximum term of five years will be charged thereafter,” he said.

Mr Robertson said that the firms would not be expected to make any repayments for two years.

Mr Nash said that the government recognised that many businesses had little or no revenue accruing to them during Alert Level 4 and Alert Level 3.

“The Small Business Cashflow Loan Scheme’ will give these companies access to cashflow to meet fixed costs on concessionary terms. The eligibility criteria will the same as the Wage Subsidy Scheme. Businesses must declare that they are a viable business, that they will use the money for core business operating costs and enter into a legally binding loan contract,” he said.

Unique to NZ businesses

Mr Robertson said that the Scheme is meant for firms that have not generated any revenue during the Covid-19 lockdown period.

“These kinds of terms are not available anywhere else. We are committed to sharing the burden of the impacts of Covid-19. As a responsible government, we must ensure that we are using taxpayer money carefully as we provide support for business,” he said.

Mr Nash said that Inland Revenue Department (IRD) will accept applications from May 12, 2020 and commence payments thereafter.

“By helping SMEs to pay their fixed costs, in addition to the tax changes, wage subsidy, commercial property measures and consultancy support already available,  we now have a substantive package to help these firms and sole traders get through this phase and into recovery,” he said.

Mr Robertson also announced changes to the criteria for the previously announced Business Finance Guarantee Scheme effective immediately.

These include removing the requirement for a General Security Agreement. 

“Further changes to the scheme will also be considered to ensure it plays a useful part in providing support to businesses,” Mr Robertson said.

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