COVID-19: Business Finance Guarantee Scheme launched

Funding lines open for SMEs - 3 April 2020

Note: Please see updated article here.

On 1 April, the Minister of Finance, Hon Grant Robertson, released further details of the Business Finance Guarantee Scheme (BFGS) which forms part of the package of reforms to support the New Zealand economy during the COVID-19 pandemic.

Under the BFGS, businesses with annual revenues between NZ$250,000 and NZ$80 million will be able to apply to banks for loans of up to NZ$500,000 for a period of up to three years. The loans will have 80 percent of the risk guaranteed by the Government, with the banks guaranteeing the remaining 20 percent. This is a major benefit for small to medium-sized businesses.

The purpose of the BFGS is to get vital funding through to businesses, while leveraging the strength of the Government balance sheet as guarantor.

The scheme is expected to result in loans of NZ$6.25 billion to New Zealand businesses.

The loans will be entered into by the relevant banks, following normal lending processes. We would expect that each bank will want to understand the impact of COVID-19 on your business and the intended use for the funds. This could involve reviewing the trading position before the COVID-19 crisis and reviewing plans for the future and the assumptions being made. Expect to be asked for the last financial statements of the business, details of your tax position, a cash flow forecast detailing income and expenditure, and personal statements of position of the business owners. Deloitte is running business continuity diagnostic labs to help with this process; your usual Deloitte advisor can explain this process.

While the individual terms and conditions may slightly vary between lenders, the loan is intended to only be used to meet urgent liquidity or bridging financing needs due to disruption COVID-19 has caused your business and not for any excluded purpose. Excluded purpose means one or more of the following:

  • Capital assets or projects, other than business as usual expenditure which does not exceed five percent of the principal amount of the supported loan.
  • Dividends to be distributed outside the applicant’s guaranteeing group.
  • On-lending outside the applicant’s guaranteeing group.
  • Refinance of an existing loan or facility.
  • Any purpose related to an excluded activity.

There are a number of businesses that the Government has deemed to be ineligible for the Government BFGS, most notably, property development and property investment; agriculture (which, for the avoidance of doubt, does not include horticulture, viticulture or aquaculture, or services to agriculture); and local authorities, council-controlled organisations and council organisations for the purposes of the Local Government Act 2002.

More details of the BFGS will be available on the websites of each of New Zealand bank participating in the scheme:

The content of this article is accurate as at 3 April 2020, the time of publication. This article does not constitute advice; if you wish to understand the potential implications of current events for your business or organisation, please get in touch. Alternatively, our COVID-19 webpages provide information about our services and provide contacts for relevant experts who can help you navigate this quickly evolving situation.

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