The government will provide interest free loans for a year to small businesses struggling to weather the impact of Covid-19.
"It has become clear that the support that is available to our small and medium businesses from banks is not meeting their needs nor our expectations as a government. That is why we have moved to provide this scheme to give some much needed cashflow," said Finance Minister Grant Robertson.
The Small Business Cashflow Loan Scheme will provide assistance of up to $100,000 to firms employing 50 or fewer full-time equivalent employees, Robertson and Revenue Minister Stuart Nash said.
It will provide $10,000 to every firm and an additional $1800 per equivalent full-time employee.
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Loans will be interest-free if they are paid back within a year. The interest rate will then be 3 per cent for a maximum term of five years. Repayments are not required for the first two years.
"We recognise that many businesses have had little or no revenue through alert level 4 and level 3. This scheme is designed to give them access to cashflow to meet fixed costs on concessionary terms," Nash said.
The scheme will be administered by Inland Revenue which will be taking applications from May 12 "and will pay out very shortly thereafter," Nash added.
The eligibility criteria are the same as for the Wage Subsidy Scheme. Businesses will also have to declare that they are a viable business, that they will use the money for core business operating costs and enter into a legally binding loan contract.
The benefit of the loan will not be passed through to the shareholders or owners of the business via, for example, a dividend or a loan to the shareholders or owner.
Robertson said the government is also making changes today to the criteria for the previously announced business finance guarantee scheme, including removing the requirement for a general security agreement.
Further changes to the scheme will also be considered to ensure it plays a useful part in providing support to businesses, he said.