Take-up of government loan scheme billions less than allowed for

Wednesday, 24 June 2020

The amount of money set aside for writing-off loans under the small business cashflow scheme has raised eyebrows at a select committee.

The Government allocated $5.2 billion for its 'small business cashflow loan scheme' but has only paid out $1.4b in loans under the scheme so far.

The scheme offers small businesses and sole traders zero or low interest loans that are intended to help tide them over through the coronavirus crisis.

The deadline for applications was extended by six weeks to July 24, on June 5.

Revenue Minister Stuart Nash told Parliament's Finance and Expenditure select committee on Wednesday that the Government had been 'very conservative' in allocating $5.2b for the scheme.

* Government considers extending deadline for low-interest loans as claims approach $1b

* Government offers small firms zero and low-interest loans up to $100,000

That calculation had been based on the possibility that all the companies and sole traders that qualified for the loans – which is all those who qualified for the first tranche of wage subsidies – would apply.

About 85,000 applications for loans averaging about $16,500 had been received so far, Nash told the committee.

The uptake of loan guarantees offered to banks to encourage them to lend to businesses through the separate 'business finance guarantee scheme' has been significantly below expectations.

National Party revenue spokesman Andrew Bayly said documentation indicated the Government had set aside for $3.4b for write-downs of the small business cashflow loans administered by Inland Revenue.

That meant the Government expected to write off $3.2b of the principal of the loans, he said.

Nash said there would probably be some companies that failed before they repaid the loans but the estimate had also been 'very conservative'.