Applications open for $6.25 billion of loans to struggling businesses

Wednesday, 1 April 2020

Economic life has ground to a halt for many businesses.

Backed with taxpayer guarantees, New Zealand's banks are offering up to a total of $6.25 billion in loans to businesses financially impacted by Covid-19.

Banks had now begun taking applications for loans from businesses struggling from massive downturns in business stemming from the fight against Covid-19, said New Zealand Bankers' Association chief executive Roger Beaumont.

The Government has agreed to cover 80 per cent of the risk on each loan, limiting banks' losses in cases that businesses end up going bust and loans do not get repaid.

'Businesses are at the heart of our economy and we know many are doing it tough as a result of Covid-19,' said Beaumont.

'We're moving quickly to protect New Zealand businesses, jobs and the economy during this unprecedented global economic shock,' Finance Minister Grant Robertson said.

* $6.25b Government-backed loan scheme designed to see more firms through crisis

* Coronavirus: Businesses welcome removal of $150k wage subsidy cap

* Coronavirus: Air New Zealand shares drop more than 40 per cent after trading halt lifted**

'We're moving quickly to protect New Zealand businesses, jobs and the economy during this unprecedented global economic shock,' Finance Minister Grant Robertson said.

'The Business Finance Guarantee will help businesses with cashflow and operating expenses, and comes in alongside the $8-12 billion wage subsidy scheme keeping people in jobs, and workers and employers connected during the lockdown.

'For most businesses their most important relationship is with their bank. The Government is using its balance sheet to give businesses and their banks space to work together through this crisis.'

'We're supporting businesses through the lockdown so their workers can stay home, break the chain and save lives, while also putting in place longer-term solutions to kickstart the economy out the other side.'

Under the scheme, businesses with annual revenue between $250,000 and $80 million could apply for loans up to $500,000, for up to three years.

'We also know we need to work together to get through this,' said Beaumont. That's why we are pleased to have reached an agreement with the Government that will help banks provide loans to businesses that have been financially impacted.'

Under the scheme banks would make available new lending to eligible businesses.

The loans would be supported by a guarantee in a risk-sharing agreement with the Government.

The Government would cover 80 per cent of the risk and banks would cover 20 per cent.

'Businesses seeking to apply for a loan under the scheme should visit their bank's website for more information before contacting their bank to discuss their eligibility and the assessment process,' Beaumont said.

'Banks will follow their normal credit assessment process 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 ten working days,' he said.

Kiwibank chief executive Steve Jurkovich said the loans represented a major lifeline for New Zealand-based businesses.

'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.

'Kiwibank has already been helping business customers with immediate liquidity needs through granting loan payment deferrals, interest only terms, and temporary overdraft facilities and is beginning to look beyond these emergency measures.

Under the scheme businesses must have exhausted their existing loan facilities with their banks.