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Labour promises to extend Small Business Cashflow Loan Scheme by three years, extend the interest-free period on loans to two years, and explore more permanent ways the govt can provide SMEs with finance

Labour promises to extend Small Business Cashflow Loan Scheme by three years, extend the interest-free period on loans to two years, and explore more permanent ways the govt can provide SMEs with finance
Stuart Nash, Jacinda Ardern

Labour is pledging to make the Small Business Cashflow Loan Scheme more accessible for a longer period of time.

It’s campaigning on giving “viable” businesses until December 31, 2023 to apply for unsecured loans under the scheme, administered by the Inland Revenue. The deadline for applications is currently December 31, 2020.

Should it get elected into government, Labour is also promising to extend the interest-free period of loans under the scheme from one year to two years.

It wants to enable businesses to use the loans for investment in new equipment or digital infrastructure, or to help them adapt to the impacts of Covid-19, rather than limiting use to core operating expenses (rent, insurance, utilities, etc) as is currently the case.

Finally, it is committing to investigating more permanent ways the state could provide small businesses with finance. This could include repurposing the Small Business Cashflow Loan Scheme, setting up a ‘Small Business Growth Fund’, establishing a micro-finance company for small businesses, or expanding the mandate of the Venture Investment Fund.

Under the Small Business Cashflow Loan Scheme, businesses can get a loan of $10,000. The size of the loan can be extended by $1800 for every full-time equivalent employee the business has, up to 50 employees. So, the maximum available is $100,000.

Should Labour advance its policy, loans would be subject to 3% interest when the interest-free period expires. This interest would be charged from the date the loan was drawn down, as is the case now.

Labour would retain the current requirement for the loan to be repaid within five years of it being taken out.

It would update the terms of existing loans under the scheme to in line with the revamped scheme.

For a business to be deemed “viable”, its directors or owners generally need to have good reason to believe it's more likely than not the business or organisation will be able to pay its debts as they fall due within the next 18 months.

When the Small Business Cashflow Loan Scheme was launched in May, it was only due to be available for a month. However, the popularity of the offer saw the deadline extended from June, to July and finally to December.

Minister for Small Business Stuart Nash in June told he was taking to Finance Minister Grant Robertson about making the scheme permanent.

By the first week of September, around 94,500 small businesses had borrowed almost $1.6 billion under the scheme. The average loan was around $16,500. Most of the businesses employ five or fewer staff.

Labour said in its policy document: “As the recovery continues, ongoing uncertainty means businesses will continue to need financing to cover lower than expected sales and to ensure they are resilient.”

In advice provided to the Government in March, Treasury emphasised the fact large corporates with good credit risk have larger bank facilities they can draw down on than small businesses.

Treasury said that as at December 2019, 36% of large corporates’ approved bank loans remained undrawn, whereas only 6% of small to medium-sized businesses’ balances were undrawn.

Digital training vouchers

In a separately policy aimed at small businesses, Labour is promising to fund $2,500 of free training for 30,000 small businesses through a new “Digital Training” voucher.

The voucher would cover fees for short-courses or training in digital technology or for support to assess their use of digital technology and develop a digital action plan.

The voucher would be targeted at businesses with up to 20 employees over the next two years.

Labour expects the training to be provided by chambers of commerce, “regional business partners”, or industry bodies.

For more, see this Labour document and this one

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Ok so rack up the debt to potentially zombie businesses what a plan.
Why not just reduce the amount of tax your sucking from ALL of us.

It's a pretty small loan though. If you've got 20 employees it works out to $46,000. That's likely to be less than 1 month's wages for your employees.

You say small, I say WHY AT ALL.
If you reduce TAX the govt is taking you benefit viable business and not potentially dead ones.

Reducing tax by a couple of % does Sweet Fark All for the cashflow of most small businesses, the increase in prov threshold has probably helped more.

Actually Sluggy, increasing the threshold merely defers the amount of tax payable to the Terminal bill. If a business can't pay/hasn't provisioned for the existing Provisional requirements then pushing those sums out to the Terminal date will just mean struggling businesses now will get into serious strife at the end of the year. It's a very bad idea. Any half pie decent owner will know what their profit/loss account looks like at EoY. If it's a profit - make sure 30% of that is put aside for the upcoming Provisionals. Even better put 30% aside from any 2 monthly GST recons.. it's really simple.


So the nanny state continues, no one is allowed to fail, no one is allowed to get sick, the kind government will take care of us all.
Where does the government get the money from to pay for all this kindness???

I think it's a bit excessive to equate a small repayable loan as the government not allowing people to fail.

that and history has taught us it is not a good idea to let to many SME fail at the same time, hence all the countries that broke out the printing presses at the GFC and now put a bit of oil in to make them go faster for covid.
the real problem is where do you draw the line and let some of the ones that should fail do just that. you only have to visit small country towns and see all the SME shops boarded up since the MOAB and see what devastation it brought to those towns, some never recovered, young people have no future there so must go to the cities.
i believe in capitalism but sometimes a govt has to help it survive when left to its own devices would take everyone around down with it

SMEs in small towns have been victims of retail consolidation for many years, my own small town has gone from a flourishing vibrant town centre with jewelers, clothes shops, sport shops, music shops, hardware stores and a myriad of others to a few struggling takeaways, a couple of pubs and a supermarket. Unfortunately the retail landscape for small towns is pretty bleak and no amount of Govt help will save it or change it.

i disagree with that, they moved a lot of government departments back office from smaller centers years ago to auckland, now they pay more in lease costs, wage costs, and the only advantage they now have is a bigger pool of people to choose from for employment.
and dont get me started on fonterable moving to a expensive building in auckland because the ex CEO wanted to live on waiheke island even though they own a massive piece of land at te rapa which closer to the main port they use which is tauranga
they are even looking at opening a police college in auckland now, so locals dont have to go to wellington for training
with technology now and the fibre there is plenty of opportunity to start spreading govertment departments around NZ giving smaller centres a boost
ie they took the oil and gas industry away from new plymouth send in archives NZ be cheaper than building in wellinton

The Nanny state is also vehemently supporting Asset holders at any cost. That is definitely to big to fail.

Give with one hand, take with the other.

So a business free loan to help meet the costs of the proposed Matariki holiday?

There is just no 'joined-up' thinking with this lot. This is why business confidence had plummeted well before COVID... cos no business owner has any confidence that this Govt understands what it takes to run a business

Viable businesses dont need free loans, they can borrow money from financial institutions at market interest rates.

thats the point they can not unless they hand over the deeds to the house, the banks changed focus years ago to property and now small business is way down the list.
good luck knocking on the door of a bank and asking for a loan without the collateral of your house behind it

That would be market economics. Gifting out free loans from tax payer money is not the answer, particularly given the Treasury have precisely ZERO experience in credit modeling for small businesses.

A viable business with income exceeding outgoings and sufficient assets (not intangibles like "goodwill") will have no issues getting expansion credit if the business case stacks up. Someone who wants to borrow money to open a second eatery/coffee shop will probably struggle without putting up hard collateral - it's a risk calculation

And here comes the Labor Party with bribes to win votes again! Exactly what happened last election with doctors visits etc. From a USA perspective, once a UBI starts being a thing, politics will boil down to who can give away the most money. Brrrrrrrrr......

all sides bribe to get people to vote for them, we have had that for years and years , that is NZ poltics in a nutsell, i dont see people that did not vote for the side that won give back the bribe when they get it, can not name a single person that gave john keys tax cut back, or WP gold card, or JA free first year student loan.

All a UBI would do is share the free money around slightly more rather than focusing predominantly on asset holders.

Labour helps business and Right wing die hard whine. Labour doesn’t help them: same response

The issue Mike is not so much the assistance (or lack of) it's the bald faced cynicism of both parties. All these luvyduvy ideas but they're only rolled out in the last few weeks prior to an election?? Gimme a break!! BTW all these promises are merely tinkering, no mention of advancing and support for new industry, no mention of aligning tertiary education (and the support required) with manufacturing industry requirements. Helping a bunch of struggling (and in many cases doomed) SMEs does not solve any mid to long term NZ issues. The "gift" to so called 'iconic tourism industries" was an unforgivable and cynical waste of taxpayer funds