The Government announced some further support for businesses affected by the North Island weather events earlier this year by underwriting bank lending and offering cheaper finance options to ensure the long term survival of critical regional industries.
The North Island Weather Events (NIWE) Loan Guarantee Scheme will provide relief to affected firms seeking commercial lending. This scheme leverages the Crown’s financial strength by carrying 80 percent of the credit risk on covered loans, allowing banks to reduce interest rates and offer more flexible terms.
- An 80 per cent Crown guarantee
- A five-year guarantee period, meaning loans issued between 1 July 2023 and 30 June 2024 would be covered by the guarantee for five years from the date of issue
- New and refinanced lending, meaning lenders could refinance existing lending under the guarantee in addition to issuing new loans under the guarantee
- New customers, meaning lenders could offer loans to new customers and refinance lending that borrowers have with other lenders
- Limits to the amount of lending to each borrower of $10 million, (with exceptions on a case-by-case basis), from each lender and across the entire Scheme
- Principled targeting requirements, including that eligible firms must be located in impacted NIWE regions, be classified as having been materially financially impacted, and meet their lender’s credit assessment criteria (ie, that they are lendable)
- A general requirement for lenders to pass on lower interest rates reflective of the benefit provided by the guarantee.
The package also includes the NIWE Primary Producer Finance Scheme to provide access to capital for affected growers and farmers unable to access lending without further support. It was also announced that a Government Inquiry will be held to review the response to the North Island severe weather events.