Billions of dollars in interest free loans available
Venkat Raman
Auckland, May 15, 2020
The New Zealand government has unpacked a scheme that allows businesses to draw up to $100,000 as interest free loan for the first year.
The amount is to be repaid by July 31, 2025 to Inland Revenue Department (IRD), which is managing the scheme on behalf of the government.
Businesses registered in New Zealand with 50 or less full-time equivalent (FTE) employees and those that were eligible for the Wage Subsidy Scheme announced on March 17, 2020 can apply for loans under the new initiative. They must also have a sound viable plan and must provide verifiable information to IRD.
Revenue Minister Stuart Nash said that most businesses will be entitled to a loan amount of $10,000 plus $1800 per FTE, subject to a maximum of $100,000.
Application process
Applications, which opened today (May 12, 2020), will close on June 12, 2020. Most successful applicants will receive funds within five working days, he said.
“The annual interest rate will be 3% beginning from the date of the loan being provided. Interest will not be charged if the loan is fully paid back within one year. Repayments are not compulsory in the first 24 months. Businesses should speak with their financial advisors before applying,” he said.
Mr Nash said that the Scheme is already proving very popular and that within a few hours of its opening, more than 6000 businesses applied for loans, totalling $100 million.
“In just a couple of weeks, IRD has built an entirely new system to process applications for loans that are interest free if repaid in the first year. These are an important source of working capital for businesses. Around 98% of IRD staff in the Capital are working from home during the lockdown. It is a testament to their skills and tenacity that the small business loan scheme has been stood up in such a short space of time,” he said.
Accountants briefed
Mr Nash said that the Scheme has been brought by some of the best public servants in New Zealand, working from their kitchen tables and home offices.
“They have given specialist briefings to tax agents and the accounting profession to help businesses apply. They have trained call centre staff and dedicated web teams to help answer technical questions. I am grateful for their service,” Mr Nash said.
An IRD notification said that once approved, most applicants will receive their loan payment in full from us within five working days. It will be paid to the bank account shown in ‘myIR.’
“You can update your bank account in myIR. There will be no loan adjustments for any tax debt owed and the loan is not subject to income tax or GST. You will be able to claim deductions for expenditure funded by the loan,” the official notification said.
Repaying the loan
Borrowing companies have five years (60 months) to pay off the loan.
IRD’s usual repayment options will be available for this Scheme.
Later this will include the ability to set up instalments.
Loans will be subject to an annual interest rate of 3% from the date it is provided by IRD.
During the loan period, the following general rules apply: (a) If you repay the loan in full within one year, you will not be charged any interest (b) If you do not repay the loan in full within one year, you will be charged interest for the entire term of the loan (b) Repayments are not compulsory in the first 24 months (c) Voluntary payments can still be made over this period (d) After 24 months, you will be required to make regular payments for both the principal and interest.
