Two business owners say the process of applying for the government-backed bank loan scheme has been so diabolical they have flagged it away and will extend their overdraft instead.
The Government set up the Business Finance Guarantee Scheme with the banks in March to encourage banks to continue lending to businesses through the Covid-19 lockdown.
But take-up of the $6.25 billion scheme in which 80 per cent of the loans are backed by the Government has been slow so far.
Just $86 million had been lent by the banks to 503 business borrowers as of June 8 - the latest available data.
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Outside of the scheme banks have done $10.3b worth of new lending to 16,428 businesses.
One Tauranga-based business owner, who didn't want to be named, said he and his business partner applied for a loan via the scheme six weeks ago through the ANZ bank.
"The ANZ have been fantastic," he said. But the process had been a nightmare.
The business owner said they had to supply around 30 pages of paperwork including cashflow forecasts, plans for how the business was coping with the crisis and how it would pay back the loan.
The man said the bank still required a personal guarantee from the directors that the loan would be paid back.
He said his partner followed up on the loan application last week and their bank customer relationship manager had said it was just too hard to get the applications over the line because of the Government's red tape and recommended they go for an overdraft instead.
"The bank manager said there were so few that were going through that it was unlikely we would get it."
The man said their business relied on overseas travellers and given the uncertainty of New Zealand opening its borders it was trying to keep going until travel opened up again.
"We are having to cut costs to the bone." The directors had suspended taking any income from the business.
But he said the Government had made the application requirements just too hard.
The man's business partner said he owned five businesses, some of which were quite large.
He described the process of applying for the loan scheme as excruciating and painful.
"You have to give your whole life away."
He said their bank manager had spent days and days writing a huge report for the application around how the directors would pay the money back.
"He said he has done six applications and only processed one successfully. It's impossible to get funding unless you meet the strict criteria."
The man said the bank had told them to get a small loan instead because the paperwork was easier.
"The amount of hours spent so far - it's just diabolical."
The man said he felt misled by promises that the scheme would be straight forward.
"They made it out to be so easy."
The businessman said the scheme may as well be scrapped given how hard it was to get approval.
"It is just a pity because so many businesses I know of - that little bit of injection of funds would just help them keep going."
"Now they are just going to have to shut up."
Small businesses with fewer than 50 staff are also able to apply for an interest-free cashflow loan from the Inland Revenue of $10,000 plus another $1800 per fulltime-equivalent employee.
The loans are for up to five years and are interest-free if repaid within a year but, otherwise, interest of 3 per cent will be charged.
More than $1b has been lent through this scheme already to more than 55,000 businesses.
But the businessman said that was only really suitable for businesses with one or two employees and would not be anywhere enough to help his business which had overheads of over $200k.
"That was specifically targeted to one or two-man businesses," he said.