Business finance guarantee scheme

01 April 2020

Businesses with turnover between $250,000 and $80 million can begin applying for up to three-year $500,000 loans from any of the nine banks: ANZ Bank, ASB Bank, Bank of New Zealand, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB Bank and Westpac.

Despite the announcement, it is understood many of the details, including how much each bank will be allocated, are still to be worked out by Treasury.

Banks are telling businesses to expect that application processes will likely take about 10 days and that they will consider the way the covid-19 crisis is affecting their business, relative to their performance prior to the lockdown.

NZ Bankers Association chief executive Roger Beaumont said: "Banks will follow their normal credit assessment processes to see if businesses qualify for the scheme and will take into account the circumstances businesses find themselves in due to covid-19. That process usually takes approximately 10 working days."

Kiwibank, ANZ and Westpac have already said they would honour the spirit of the guarantee scheme and would assess each business's state of solvency based on its trading history and outlook for after the lockdown ends, not their current position, while BNZ has taken a somewhat more cautious stance.

ASB envisages being able to help up to 40,000 customers through the guarantee and other support measures.

Westpac's general manager of commercial, corporate and institutional banking, Simon Power, said the scheme is designed to help viable businesses to meet costs over the coming weeks and months.

The lockdown is expected to last at least another three weeks, although it may last longer.

Many businesses have fixed costs that they need to continue to pay even though they are not trading at the moment. These are things like rent, vehicle leasing and staff salaries.

Simon Power sounded a note of warning, saying each business will be different but that all will have to provide financial projections.

Kiwibank's Steve Jurkovich said: “My message to businesses is talk to us early. Even if you think you’ve got sufficient cash flow to see you through the initial shock of Covid-19, the financial impacts could be felt for much longer, and we are committed to doing what we can to help you get through this”.

Loan proceeds can't be used to cover capital assets/projects, distribution of dividends, on-lending outside the borrower's group, or to refinance existing debt unless it was advanced on or after March 16, 2020.

The maximum term for each loan is three years.

Different banks will have different rules regarding terms.

The scheme only covers new lending.

Property development, property investment and agriculture are among the businesses excluded.

Interest costs associated with the loans have not specifically been detailed but are expected to be low based on the 80% Government Guarantee component.

If you would like some assistance in applying for an advance under the Business Finance Guarantee Scheme, please contact one of our ADVISORS.

Disclaimer:This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

Stay in touch. Please do not hesitate to contact your client advisor.

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