Cabinet agrees to extend Small Business Cashflow Loan Scheme by three years; Will consider making larger loans available

Cabinet agrees to extend Small Business Cashflow Loan Scheme by three years; Will consider making larger loans available
Stuart Nash, Jacinda Ardern

Cabinet has agreed to make the Small Business Cashflow Loan Scheme accessible for a longer period of time.

Businesses will now have until December 31, 2023 to apply for unsecured loans under the scheme, administered by the Inland Revenue Department. The deadline was previously December 31, 2020.

The interest-free period of loans under the scheme will also be extended from one year to two years.

And the criteria for what the loans can be used for will be broadened beyond core business operating costs to capital items.

Labour campaigned on these changes ahead of the election.

Under the Small Business Cashflow Loan Scheme, “viable” businesses can get a $10,000 loan. 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.

Finance Minister Grant Robertson said that before the end of the year, Cabinet would consider allowing businesses that have repaid their loans to take out another loan under the scheme, increasing the cap to make larger loans available and/or adjusting the eligibility criteria.

Robertson said legislation would be required for some of these changes.

Loans are subject to 3% interest when the interest-free period expires. This interest is charged from the date the loan is drawn down.

Loans need to be repaid within five years of them being taken out.

Close to 100,000 businesses have received a loan under the scheme to date, with lending totalling $1.6 billion. The average value of each loan is $17,000. 

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11 Comments

If businesses didn't apply for the wage subsidy, can they get this loan? I looked into it some time ago, and it didn't appear so. If they can't it doesn't make much sense IMO, because some businesses may not have chosen to go for the subsidy, some for ethical reasons, but have been affected later on.

The loan scheme is intended to resolve cashflow deficits for otherwise profitable businesses.

COVID related disruptions can cause shortages in liquidity for small companies who can’t borrow from money markets due to tighter bank lending restrictions. The loan is designed to relieve these enterprises of their funding issues.

Makes FLP pretty useless if they restrict it only to business loans then.

I strongly doubt the RBNZ will limit lending through the FLP to business lending, as per these comments: https://www.interest.co.nz/banking/107439/rbnz-hints-its-funding-lending-programme-having-few-conditions-and-not-necessarily

The FLP is designed to lower interest rates to boost inflation and employment, while this loan scheme is to help SMEs stay in business. Two different goals. 

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I'm starting a business:

My business plan is to borrow as much money as possible at zero percent, then put it into an interest bearing account.

Would this business model qualify OR would I be required to park the money in houses via a shell company? Zero percent mortgage rate for 2 years - sounds good!

Do new businesses qualify or just zombie hanger-ons? Great that it's unsecured. Seriously, this is like the best carry trade ever!! Like how could you lose?

Prob only available to the zombies that have already been chomping at the government teat.

you mean put it into the housing market right?

right

Used to happen with zero-interest Student Loans, too. Draw down the lot (or the limit, or whatever was possible), put it towards something with a non-zero yield, and harvest the ensuing revenue stream....

I look at it this way; the government is doing the banksters work - writing loans to keep the system afloat.

If you have ever applied for a business loan without the backing of residential property... some one had to keep businesses afloat, the banks sure as shit have absolutely no appetite for the productive economy.

Bankers aye ..