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COVID-19 Updates

02 April 2020

In these extraordinary times we find ourselves living through, many businesses would have seen the government’s recent announcement as welcome news and hopefully, it provided additional confidence that your business can weather the storm that is COVID-19.

Here is a summary of what you need to know about the scheme:

  • The government has committed to guaranteeing* up to $6.25b of business loans to SME businesses in New Zealand;

  • There are nine banks included in the scheme as follows - ANZ, BNZ, ASB, Westpac, Kiwibank, Heartland, TSB, HSBC & SBS;

  • As of 2/04/20, all banks are taking applications under the scheme. They have indicated the timeframe will be approximately 10 days from application for finance to bank approval;

  • The maximum loan amount is $500,000 and is available to businesses with annual income between $250,000 - $80m**. The loan term is a maximum of 3 years;

  • Interest rates should be materially lower than historical bank rates for this type of lending. As usual, applicable interest rates will be determined on a case by case basis;

  • At this stage it has been indicated applications for these loans should be made through normal channels e.g. your broker or bank manager;

  • The purpose of these loans must be to accommodate operational costs or other costs & factors relating to the COVID-19 lockdown and resulting impacts on your business. Loan requests for growth, acquisition or capital expenditure funding will not be considered as part of the scheme. Agriculture, property development and property investment are also excluded from the scheme;

  • Whilst the banks have not yet published any guidance around loan criteria (and are unlikely to), it is likely to be assessed based on pre-COVID-19 performance and the business being profitable, solvent and sustainable in the lead up to the country being in locked down. It will be important that you have a clear idea as to what your business looks like post the current situation and based on reasonable assumptions that your business can meet the additional loan repayments along with all of the other obligations your business needs to meet going forward. Guidance on this point has been provided by some of the banks. A recent quote from ANZ’s Mark Hiddleston was “to make the assessment quicker, we ask that when we have conversations with customers, they come with a plan or some thinking about how they intend to last the crisis and get the business back on its feet afterward. Westpac’s Simon Power went further and said “each business will be different but all will need to provide financial projections”;

* The government is guaranteeing 80% of the money the bank lends under the scheme and the residual 20% is carried by the banks.

** It has been indicated that the government is continuing to work on additional (bespoke) solutions for businesses that fall into the upper end of the income range.

Please feel free to reach out if you have any further questions and/or would like us to assist you in gaining access to funds under the scheme.

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