The Government will provide up to $6.25 billion as it stands alongside private banks in a new scheme to attempt to loan money to small and medium-sized businesses.

Finance Minister Grant Robertson announced details of a scheme, in which taxpayers will take on most of the risk of loans to private businesses on Tuesday afternoon.

Businesses with turnover of between $250,000 and $80 million will be eligible for loans of up to $500,000 for a term of up to three years.

"The Business Finance Guarantee Scheme will provide short-term credit to cushion the financial distress on solvent small and medium-sized firms affected by the Covid-19 crisis," Robertson said in a statement.


While the scheme is broadly similar to that of Australia, there the risk was shared equally between banks and the Government. In New Zealand, the Government will take 80 per cent of the risk.

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Robertson said he was comfortable with the higher level of risk.

"We are in extraordinary times here, and we need to make sure that this lending is getting to the people who need it," Robertson said.

"We felt on the balance of the discussions that a higher level of Crown guarantee would encourage the banks to lend to businesses that are solvent but ones that have encountered significant difficulty."

The banks, not the Government, will make decisions on whether the businesses should be eligible for the loans, Robertson said.

"The scheme leverages the Crown's financial strength, allowing banks to lend to ease the financial stress on solvent firms affected by the Covid-19 pandemic," Robertson said.

"We have committed to monitoring this scheme and we are prepared to evolve this scheme over time if necessary."


On Sunday, Australian Prime Minister Scott Morrison said A$20 billion ($20.4b) would be provided to be invested dollar for dollar alongside banks to provide working capital to small and medium sized businesses.

"The Government's support will enhance lenders' willingness and ability to provide credit to SMEs with the scheme able to support $40b of lending to SMEs," Morrison said in a joint statement with Treasurer Josh Frydenberg. The Government's official Covid-19 advisory website