Changes to simplify and expand the Business Finance Guarantee Scheme will allow banks to make more loans available under the Government’s 80% guarantee.
Finance Minister Grant Robertson said the Treasury and banks have been working to update the scheme based on feedback from banks and their customers. Changes include longer loan terms and a higher maximum loan amount covered by the scheme.
“We’ve been open about the fact that the original scheme has seen a lower uptake than we would have liked, with $150 million lent to 780 customers to date. The changes announced today should allow the banks to be more flexible with the scheme,” the Minister said.
The Business Finance Guarantee Scheme supports the provision of bank loans to viable businesses, encouraging banks to lend where otherwise they may not, by the Government taking on the default risk for the bank of up to 80% of the loan. Borrowers are still liable and must pay the debt back, with interest, in the usual way.
The Treasury’s website, www.treasury.govt.nz, has comprehensive information on the Scheme. Businesses seeking to access the scheme should contact their bank. Participating banks are ANZ, ASB, BNZ, Heartland Bank, Kiwibank, SBS Bank, TSB, Bank of China, and Westpac.
Key changes announced include:
Maximum loan limit increased from $500,000 to $5 million
Maximum term of loan increased from three years to five years
Criteria for borrowing extended from liquidity support/bridging finance to enable general purpose borrowing, including for capital investment, for businesses affected by COVID-19
More medium-sized firms can access these loans with revenue limits extended from $80m to $200m per annum.
Scheme available until 31 December 2020
BFGS loans can be used to re-finance up to 20% of a borrower’s existing indebtedness
Watchlist criteria relaxed
Personal guarantee requirement clarified – there is no personal guarantee required by the Crown. The Crown will pay a claim in event of default where no personal guarantee has been provided
Discretion available for banks to act outside Supported Loan Policies, Practices, and Processes.
-TIN Bureau