Coronavirus: $100k spent on new business due to open during lockdown

Sunday, 10 May 2020

The lockdown and border closures resulting from Covid-19 are decimating tourism businesses.

Andrea estimates she has already spent $100,000 getting her new real estate business ready to operate.

She’s hired a personal assistant, taken on a lease, painted and fitted out her new offices.

But on the day she was meant to start operating – April 10 – the country was in level four lockdown. Real estate activity was on ice.

While the outlook improved as the country shifted to level three, Andrea, whom Stuff has agreed not to identify, has had a fight to attract business without an open shopfront, or any face-to-face networking events to spread the word.

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“If I’m struggling I think others will be too. I made the decision late last year to go into business and leased the premises from February. I’m lucky I didn’t have to start paying the rent until now but I have been doing renovations.”

The Ministry for Social Development said new businesses could claim the wage subsidy after a month of trading, if they could show a decline in revenue compared to what had been forecast.

She is paying her personal assistant out of her own savings because she’s been told that she does not qualify for any help via the wage subsidy.

The Ministry for Social Development told Stuff that might change after she’s been in business a full month.

“I can’t prove a decline in business because there was nothing before at all. I’ve got an $100,000 overdraft that will get used.”

The nature of her work meant she was not likely to be paid for months, she said. There was still another $40,000 to spend on the building. “I can’t go back, it’s a viable business with listings and I have been really positive but I just got off the phone from Inland Revenue saying ‘you’re one of those loopholes’.

“I can’t qualify for an interest-free loan because you have to meet the same criteria. I can’t prove a decline in sales… I was crying on the phone to the guy but he said there’s nothing they can do.”

Andrea said she expected the first year in business to be tough “but this is extra tough”. “I’m committed, I have to see it through.”

Jayne Russell, group general manager employment at the Ministry for Social Development, said Andrea could be able to claim a subsidy if, after a full month’s trading, she was able to show a loss compared to projected revenue for the business.

“To meet the wage subsidy income test a business must be operating for at least a month so they can compare that month to their projected revenue to see if any loss can be identified.

“The wage subsidy eligibility timeframe is until June 9, 2020. This means businesses that opened during lockdown and have experienced a decline in revenue actual or projected because of Covid-19 can still apply for the wage subsidy in their second month of operation.”