More New Zealand small businesses will be eligible to take out interest-free loans under recent changes to a government cashflow scheme.
Commenting on the initiative, Revenue Minister David Parker said one of the Government’s top economic priorities was to extend the Small Business Cashflow Loan scheme for three years and extend the interest-free period to two years: “We have extended the purpose of the scheme and will enable borrowing for investment in new equipment and digital infrastructure. Additionally, firms can draw down a second loan, if they still meet eligibility criteria and have repaid the original loan in full. We want to keep viable businesses afloat where we can.
“Some firms have promptly repaid their original loan and may wish to draw down another loan as circumstances change. More businesses will have access to this line of credit to help them prosper.
“There are encouraging signs for our economy, but the global economic outlook remains uncertain. The scheme provides a backstop for small and medium businesses.”
Small Business Minister Stuart Nash added that cashflow support for small and medium enterprises (SMEs) has been central to government efforts to accelerate the economic recovery and sustain businesses and jobs: “The interest-free loans have proven a popular and fast way to access finance. We are delighted to reach a milestone of 100,000 SMEs who have drawn on this government support to the tune of NZ$1.6 billion.
“Many businesses have also repaid their loans as the economy continues to open up. Around 6,500 SMEs have so far made more than $45.4 million in repayments.
“As the economy moves into recovery and rebuild we are also broadening the eligibility criteria so more businesses can access support. Businesses established after 1 April 2020, which have existed for six months, will now be eligible for a loan if they meet other eligibility criteria.
“We are also changing the requirement that a business must have experienced a decline in actual or predicted revenue of at least 30% in any 30-day period from January to June 2020, compared with the same period in the previous year.
“The new criteria are that businesses can demonstrate an actual drop in revenue of at least 30% because of COVID-19, over any 14-day period in the previous six months, compared with the same 14-day period a year ago.
“If the applicant was not in business a year ago, the 14-day period can be compared with the same or similar period in the previous month. Businesses must also declare that the drop in revenue is due to COVID-19, and have records to support this.
“Micro-businesses have made good use of the scheme, with 82% of loans going to firms with one to five employees and 92% of loans going to firms with 10 or fewer staff. Most loans have gone to SMEs in construction and building (17%); accommodation, restaurants and cafes (12%); professional, scientific or technical services (10%); retail trade (9%); and manufacturing (7%).
“The decision to extend the interest-free loan scheme is designed to give confidence to our smallest businesses and keep up the momentum of recovery. The Government is continuing to back the business community.”
The expanded eligibility criteria come into effect in February 2021.