1 May, 2020
The Minister of Finance, Grant Robertson has announced that the Government will provide interest free loans for a year to small businesses impacted by the COVID-19.
While this isn’t exactly what the Restaurant Association has been lobbying for, this may provide some immediate cashflow relief for some members. We outline below the announcement details.
The Minister of Finance and Minister of Revenue say that the Small Business Cashflow Loan Scheme will provide assistance of up to $100,000 to firms employing 50 or fewer full time equivalent employees.
- The scheme will provide loans of $10,000 to every firm and in addition $1800 per equivalent full time employee.
- Loans will be interest free if they are paid back within a year. The interest rate will be 3% for a maximum term of five years. Repayments are not required for the first two years.
- This scheme is designed to give small business owners access to cashflow to meet fixed costs.
- The scheme will be administered by Inland Revenue who will be taking applications from the 12th of May, and will pay out very shortly thereafter
The eligibility criteria are the same as for the Wage Subsidy Scheme. Businesses will also have to declare that they are a viable business, they will use the money for core business operating costs and enter into a legally binding loan contract.
The Government is also making changes today to the criteria for the previously announced Business Finance Guarantee Scheme, under which businesses can apply to their banks for loans up to $500,000, for up to three years. The changes include removing the requirement for a General Security Agreement. (A General Security Agreement, or GSA, is a form of security often used to secure commercial loans or credit arrangements. It is typically used when a company is borrowing money – the lender holds security over the assets of the borrowing company.)