New Zealand Expands Business Finance Guarantee Scheme

Source: Regulation Asia Editors, Regulation Asia 2020-08-21

The maximum loan amount and maximum term are being increased, and more businesses will have access to the scheme, until 31 December.

New Zealand’s government has simplified and expanded its Business Finance Guarantee scheme in response to feedback from banks and their customers.

The scheme was launched in April, allowing banks to provide short term credit to SMEs with the government guaranteeing 80 percent of the loan amount.

Under the changes, the maximum loan amount covered has been increased from NZD 500,000 to NZD 5 million, and the maximum loan term has been increased from the original three years to five years.

Likewise, the RBNZ (Reserve Bank of New Zealand) has extended the term of its lending facility for banks from three years to five years. The facility will run through to 1 February 2021.

Loans granted under the scheme can also now be used by businesses impacted by Covid-19 for general-purpose borrowing, including for capital investment. To date, the scheme has only allowed borrowing to be extended to businesses for liquidity support or bridging finance.

More medium-sized firms will be also able to access loans under the scheme, with the revenue limits being expanded from NZD 80 million to NZD 200 million per annum.

It has also been clarified that personal guarantees are not required for the government to guarantee 80 percent of the loan amount. Borrowers are still liable to pay the loan back in the usual way.

“We’ve been open about the fact that the original scheme has seen a slower uptake than we would have liked, with NZD 150 million lent to 780 customers to date,” Finance Minister Grant Robertson said in a statement announcing the changes.

“The changes announced today should allow the banks to be more flexible with the scheme.”

The scheme is available until 31 December 2020.

The NZBA (New Zealand Bankers’ Association) has welcomed the changes, saying they will support the supply of credit to businesses.

“We think expanding the criteria should make it more relevant for businesses in need at this time,” says NZBA chief executive Roger Beaumont.

New Zealand

bank

financing

Liquidity

Covid-19

New Zealand Expands Business Finance Guarantee Scheme

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