Information on the Business finance guarantee scheme for businesses affected by the economic impacts of COVID-19.
The Government, retail banks and the Reserve Bank announced a major financial support package for businesses and home owners affected by the economic impacts of COVID-19.
Government has launched a business finance guarantee scheme for small and medium-sized businesses, to protect jobs and support the economy. The Crown, in partnership with participating approved banks, will support targeted new loans (including increases to existing limits) to eligible businesses, as a response to difficulties caused by COVID-19.
Government is guaranteeing 80% of the risk, while the banks are covering the remaining 20%. A normal lending process will be followed by the banks, which will make the lending decisions. Further details can be found on the banks' websites.
More information on the announcement can be found at Beehive.govt.nz.
Business finance guarantee – applications open (external link) — Beehive.govt.nz
More information about updates to the scheme can be found at treasury.govt.nz
Business finance guarantee scheme updated (external link) – Treasury.govt.nz
Government and the banks are implementing a $6.25 billion business finance guarantee scheme for small and medium-sized businesses, to provide finance to protect jobs and support the economy.
The scheme supports the provision of new bank loans to viable businesses by the Government taking on the default risk up to 80% of the loan. Borrowers are still liable and must pay the debt back, with interest, in the usual way.
The government guarantee does not limit the borrower’s liability for their debt, and only applies to any shortfall the bank has, after it has exhausted all normal avenues to recover the debt in the event of a default by the borrower.
After working with banks and hearing from the business sector, updates were made on May 1 2020 based on feedback received. More updates may be made in the future to further improve the scheme.
Your bank will decide whether a new loan can be supported under the scheme through its normal credit assessment process. Your bank will also take into account your circumstances due to Covid-19.
To be eligible to apply for a loan under the scheme your business must be New Zealand-based, with annual turnover of up to $80 million, not on your bank’s credit watchlist as at 31 January 2020, and not engaged in excluded activities (see below).
Updates made to the scheme announced on 1 May 2020 mean it is now available to more businesses than previously. These changes included:
The updates also make the scheme more flexible, achieved by:
Your bank will decide whether your financing can be supported under the scheme through its normal credit assessment process. Your bank will also take into account your circumstances due to Covid-19.
No. The scheme supports the provision of new loans to businesses through a participating bank. Any loans will need to be repaid with interest, in the usual way.
Customers are able to apply to the banks now. Details are on each individual banks’ website.
The repayment schedule and commercial terms will need to be agreed with your bank. Your bank will clearly explain to you the repayment terms for these loans.
Talk to your bank to discuss your financing needs. They will advise whether your financing can be supported under the scheme. Details are on the banks’ websites.
Your bank will decide whether you can access finance under the scheme. To see if you qualify for a loan, your bank will follow its normal credit assessment process. This process will be modified to enable the bank to give effect to the scheme and to allow the bank to look through the economic cycle to sensibly take account of the uncertainty of the current economic conditions caused by COVID -19.
The facility limit for an individual loan will be a maximum of $500,000. However, the maximum amount your bank is prepared to lend to you will be determined by your bank.
The loans are intended to provide for businesses’ current and up-coming operating cash flow needs including things like rent and staff expenses. See also: What will the loans not fund? below.
Interest rates will be determined by the banks under their normal lending criteria.
Loans will be provided by banks to businesses that have urgent liquidity and bridging finance requirements caused by disruption to business as a result of COVID-19. See also: What loans will not be funded?
No. You will need to provide security for the loan as you would normally. The Government and participating banks have agreed to share the risk in case of default only.
While banks remain in control of their own lending decisions and may have their own requirements, the Government original expectation that lending over $50,000 would require a general security agreement has been removed.
The Government Guarantee does not limit the borrower’s liability for their debt.
The Government Guarantee only applies to any shortfall the bank has, after it has exhausted all normal avenues to recover the debt in the event of a default by the borrower.
The schemes are complementary. Businesses should evaluate each scheme against their specific needs. The Government has funded specialist consultancy support services to provide advice to businesses who need it. You can use the Boost tool to find out what services are available in your region.
A supported loan will not be available to fund:
Supported loans are limited to a maximum term of three years. However, the exact terms of individual loans will be determined by each bank.
Borrowers are fully responsible for repaying the loans under the scheme. If Borrowers default on payments, banks will follow their usual default processes.
All New Zealand registered banks are eligible to apply to join the scheme. Banks currently participating include ANZ, ASB, BNZ, Heartland Bank, Kiwibank, SBS Bank, TSB, The Bank of China and Westpac.
To establish the Scheme at pace, initial applications were limited to New Zealand registered banks as they are directly supervised by the Reserve Bank of New Zealand (NBDTs are primarily supervised by their Trustees). The Treasury are now considering whether the scheme could be opened up to other participants.
No. Applications for a loan under the scheme must be made to a bank that is participating in the scheme.
Government has introduced a range of measures to support businesses and individuals. More information on support available is available at uniteforrecovery.govt.nz.
Financial support for businesses (external link) — uniteforrecovery.govt.nz
Loans will be available under the scheme until 30 September 2020.
The Crown will pay 80% of any loss incurred by a bank on a loan it makes under the scheme, after the bank has completed its normal enforcement procedures.
The Treasury will have oversight of participating banks compliance through a robust monitoring and reporting process.