Small businesses have another six months to apply for an interest free, government-backed loan as the Small Business Cashflow Loan Scheme is extended 

Small businesses have another six months to apply for an interest free, government-backed loan as the Small Business Cashflow Loan Scheme is extended 
Grant Robertson. Getty Images.

The Government is extending the deadline for Small Business Cashflow Loan Scheme applications until the end of the year.

The deadline had already been extended to July 24, and will now be pushed out to December 31.

Inland Revenue has administered the distribution of 90,485 loans valued at $1.51 billion.

Under the scheme, small businesses can get unsecured loans of up to $100,000 depending on their size. The loans are interest free if repaid within a year.

To date, more then 1,500 borrowers have repaid almost $4.9 million.

Here is a press release from Revenue Minister Stuart Nash:

Small businesses are getting greater certainty about access to finance with an extension to the interest-free cashflow loan scheme to the end of the year.

The Small Business Cashflow Loan Scheme has already been extended once, to 24 July. Revenue and Small Business Minister Stuart Nash says it will be further extended to 31 December, to give assurance that business support remains available over coming months.

“The decision to extend the interest-free loan scheme is designed to give confidence to our smallest businesses and keep up the momentum of recovery. It shows the Government is continuing to back them in the post-lockdown environment,” Stuart Nash said.

“It will ensure businesses aren’t under pressure to decide quickly whether the loan scheme is right for them. Extending the scheme will give businesses owners more time to carefully evaluate their situation as our economy keeps opening up.

“The interest-free loans came at just the right time. Businesses with temporary cashflow issues during the lockdown are now taking advantage of one of the most open economies in the world. More than 1,500 borrowers have already repaid almost $4.9 million.

“We want to protect jobs and keep as many businesses afloat as possible. The loans are a useful complement to the wage subsidy. They provide businesses with cashflow support for non-wage costs, while the wage subsidy ensures they keep staff on the books.

“I’m particularly pleased that micro businesses, with between one and five staff, have made good use of the scheme. Around 80 per cent of firms who applied have one to five employees, and just over 90 percent have 10 or fewer staff.

“As at Friday 3 July, 90,485 small businesses had applied for more than $1.51 billion of loans since 12 May. The average value of each loan is modest, around $16,700. But it is much needed working capital to help in a tight spot.

“The loans are a backstop for small and medium businesses who are not able to get the cashflow support they need from banks. Many don’t have a well-established relationship with their bank, or the bank might ask them to put up their house as collateral. That just doesn’t work for these firms.

“The firms are diverse, and most applications are from industries in construction, accommodation, restaurants and cafes, retail trade, transport and manufacturing.

“The loan conditions remain the same. I urge business owners to talk to their bookkeeper, tax agent or accountant, or log onto the MyIR portal, to ensure they take advantage of this government support,” Stuart Nash said.

Terms and conditions – overview

  • Loans are interest free if repaid within a year.
  • After one year the interest rate is 3%, from the date of draw-down, for a maximum term of five years.
  • Repayments are not required for the first two years.
  • SMEs employing 50 or fewer staff, who were eligible for the original wage subsidy, are eligible to apply for the one-off loan.
  • The loan amount is $10,000 plus $1,800 per equivalent full-time employee, up to a maximum amount of $100,000.

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30 Comments

Yawn.....

14
up

Yes, this government really doesn't get it. Small business do not want more loans. They want a government who appreciate and understand why you would want to run a business, yes to put your energy in something to get ahead in live for yourself, family or country. Not to be plucked and given no hope for all your effort. Maybe to give everyone responsibility back would be a good start.

So what do you actually mean?

That's what I mean, you not the only one, we have a whole government that doesn't get it.

By that do you mean there should be no socialism to support business?

Problem is, in your way stand the crowd who were lucky enough to be born at the right time to get into property cheap then have it inflate around them, and credit themselves with being very astute business people. What we should be doing is greatly reducing business income tax to encourage such productive enterprise as you are making, and rebalancing via a Land Value Tax to collect some of the free money awarded to land by virtue of the activity of others around that land.

But no...the chattering speculators demand a free ride and thus you in useful enterprise must be overtaxed to pick up the slack. Because those folks non-means-tested pensions must be funded somehow.

RS, are you going to spend your whole life complaining "not being born at the right time"? We can't change when we're born, why not accept it and focus on things you can change to improve your life?

Yvil, are you so self-oriented that the idea of advocating for others has never occurred to you? Why would you assume that advocating for better policy cannot improve opportunity for others in life?

What sort of character would happily profit from untoward situations without advocating for improving the environment for others?

Blah, take out the loan and fly overseas .. we know it'll happen.

That or take out the loan then close your limited liability company LMFAO.

Money printer go burrrrrrrr

Interesting move by Messrs Robinson & Nash. Takes quite a bit of wind out of Mr Muller's sails by providing concrete assistance to SMEs. The danger I see here is that it may prop up some effectively "zombie" enterprises and load them up with more dept. If the two wage subsidies haven't eased their strife, they are probably mortally and fatally wounded. If I owned an SME I would be extremely wary of this scheme unless I was able to demonstrate a rising cashflow that was dependant not on casual foot traffic (think cafes, bars and small tourism operators) but on confirmed forward orders. The unfortunate fact is many micro businesses don't have the disposable funds to employ advisers other than a tax agent or accountant.. neither of whom will supply financial advice.

Between this and the Fed buying junk bonds, slowly business is moving back towards state ownership - if not by equity directly, then by debt obligation and reliance on the state to pay the wages of staff across almost every sector of the economy. It’s a movement away from free market capitalism back towards who knows what or how far to the left - perhaps Karl Marx was right after all.

@Hook dont be deceived , this is not 'concrete assistance to SME 's" .

Its kicking the can down the road

The money s being lent on normal credit risk criteria, and "interest Free " is a joke when rates are close to zero

Wage subsidy to follow....

Quite possible alittle, however see my comments about zombie businesses. What it may also do is allow those who have used a property as collateral to dispose of the house, pay down their loan/outstanding debt and possibly start anew. I certainly feel for those in that situation - it must be nerve wracking in the extreme

I believe not, Jacinda has said no to extending the wage subsidy

What might be more helpful is to rationalise our border controls and allow tourism to restart. Iceland have lead the way on this:
https://youtu.be/sQ7ps9TJ4ys

One case of community spreading before the election will probably be the end of Jacinda. She won't open up any time soon.

Squishy that is far to sensible for consideration. Who cares about tourism anyway. It's only 17 billion dollars of exports per year.

Lots of new loans will be taken out followed by lots of SME's ceasing trading, followed by lots of new SME's suddenly starting trading with names closely aligned with those that just ceased trading. Congrats taxpayers, your hard earned money is going to already wealthy bosses.

Except if the banks who are issuing these loans have requested a Personal Guarantee. While the government is on the hook for 80%, the banks still won't want to lose their 20%.

E.g. BNZ

We’ll require usual security arrangements, which may include a General Security Agreement (GSA) and personal guarantees (where applicable).

There was a pitifully low number of those loans taken out. You aren't any government crowing about it because it was mostly a failure.

Why "pitifully"? The support was provided if required, those who felt the need took the loans out. Sounds like another Blue good, Red bad, ugg ugg response.

The issues with the scheme have been well-documented - the low amounts lent out compared to the IRD scheme suggests it was too unwieldy and complex, it was lumped on the banks with little notice, who then made things worse by requiring 100% security for loaned amounts despite only taking on 20% of the risk. But sure, my criticism is definitely just political, not at all the result of trying to navigate the scheme itself and definitely has something to do with National, who I didn't even mention once.

It was low, because banks still wanted your firstborn as security, you had to provide a 6 -12 month cashflow forecast, balance sheet, P and L, debtors and creditors ledger.
For a lot of small business the cost of putting this together probably out weighed any benefit.

The banks basically wanted everything they normally get for an Overdraft or business loan, if you looked even marginally shaky they werent taking the 20% risk.

Election bribery , interest -free is a very deceptive 'carrot' .............its going to cost Government very little, given interest rates are almost at zero

Or an entire shift in economic systems/philosophy...look at the Fed buying junk bonds and paying a bunch of wage subsidies as well! The state is slowly taking control back of the private sector. Marxism here we come..

I do wonder if the free market isn’t able to effectively allocate resources for the benefit of the many in society, then whether the trend further towards higher state ownership/intervention will increase even faster.

But then you see Donald Trump saying he’s going to wage a war on the radical left and Marxists, yet it’s him sending people cheque’s in the mail because the free market is failing society and it’s the Fed buying junk bonds - ie the bad debt of failing companies to keep them afloat. He and the Fed are promoting Marxism for political purposes, but pretending that concept is the enemy at the same time to keep his voter base happy. Strange times we live in.

I don’t really think it’s the free market failing seeing as how we haven’t had “free” markets for a long long time now. So much central bank interference has stopped the free market from the essential function of purging bad businesses and it has destroyed price discovery.

Wow this is desperation stuff designed to boost business confidence by pushing the economic support horizon even further out. This is bad news and mismanaged business should be left to fail or there will be no end to this and somebody has to pickup the tab so guess what more tax tax tax post election

Anyone taking out this small business loan just for the sake of it needs their head read.

Its a loan , it has to be repaid , and if your business is shaky, and impacted by Covid , it may , in some cases , be worthwhile to simply close up until things get normal again.

Some businesses are doomed to fail as a result of Covid-19 , they were struggling before the pandemic

We we in the Bay of Islands two weekends ago, and notwithstanding its winter , the place was deserted
when compared to our normal experience ..

We really do need to re-open the economy as soon as practically possible

The Government can be irritating times, but a lot of people blame the Government mainly out of tribalism. Blue is good - so business is good, Red is bad - so business is bad. Or Blue is bad - so business is bad, Red is good - so business is good. I've seen criticisms that simply resolve to tribalism - meaning that the Government itself isn't really at fault, more of an outlet for blame. A lot of these sorts of schemes are being deployed all over the world - from varying political parties and political persuasions.