The government will bear 80 per cent of the credit risk of that lending, with the remainder sitting with trading banks.
Loans will be limited to $500,000 and available to firms with annual revenue between $250,000 and $18 million, although the government is willing to hear feedback and tweak those limits, if necessary, Finance Minister Grant Robertson said in announcing the measure.
The lending will be at normal commercial interest rates.
The package is similar to initiatives announced in Australia over the weekend – New Zealand's four largest banks are owned by Australian parent banks.
Meanwhile, the US Federal Reserve will now lend against student loans, credit cards and loans to small businesses and will expand its buying of mortgage-backed securities to try to calm financial markets.
"While broader markets remain reluctant to buy back into risk assets, we expect haven plays will remain popular through the short and medium term," said Sydney-based foreign exchange firm OFX.
"That said, we would expect the record levels of central bank and government stimulus to bite at some point," OFX said.
Countries around the world, including Britain and large swathes of the US, are shutting down either completely or partially to try to limit the spread of the covid-19 virus. New Zealand's complete shutdown bar essential services begins at midnight tomorrow.
"These are times that we've never seen. A lockdown is quite an amazing concept," said Pat Gilligan, a director at Forex.
The US equity futures are currently headed higher so Wall Street should have a better day, Gilligan said, noting that the Dow Jones Industrial Average was 37 per cent down from its February 12 peak at yesterday's close.
Gilligan said one aspect of the shutdown process that has been a problem for his export clients is the lack of clarity on what are deemed essential businesses.
"I spent yesterday talking to a number of exporters who were really frustrated at the time it took for essential services to be defined," he said.
This is happening at the peak of the export season for horticulture, dairy and meat products.
"Half the apples are still on the trees and the kiwifruit are still on the vines and worth billions and billions of dollars," he said.
All food exporters have been defined as essential industries.
The New Zealand dollar was trading at 97.60 Australian cents from 97.71 cents at 5pm yesterday, It was at 49.71 British pence from 48.36, at 53.53 euro cents from 52.60, at 63.76 yen from 62.15 and at 4.0973 Chinese yuan from 4.0013.
The bid price on the two-year swap rate rose to 0.5825 per cent from 0.5275 yesterday while 10-year swaps increased to 1.0100 per cent from 0.9825 per cent.
