Coronavirus: Banks take loan applications under Business Finance Guarantee Scheme

Piggy bank along tightrope
A staggering $6.25b of Government-backed loans are open for business. Photo credit: Getty.

Businesses struggling to stay afloat during the COVID-19 crisis can now apply for loans of up to $500,000 under the Government’s Business Finance Guarantee Scheme.

A staggering $6.25 billion in loans is available to businesses with revenue between $250,000 to $80 million a year, for up to three years, with 80 percent of the risk carried by the Government.

On Wednesday, Finance Minister Grant Robertson said that the scheme provides cash flow to struggling businesses so they can meet operating expenses.

“We’re supporting businesses through the lockdown so their workers can stay home, break the chain and save lives, while also putting in place longer-term solutions to kickstart the economy out the other side,” Robertson said.

Having stepped up to the plate, banks are now taking loan applications, telling their business customers that a decision would likely take several days.

Mark Hiddleston, managing director, commercial and agri at ANZ, said that the bank would look at how COVID-19 had affected business operations. It would also consider any financial position before the crisis and plans to resurrect trading when restrictions are loosened.  

Business owners needing loans are advised to think about their plans over the next one-to-three years, their ability to repay new debt and the support they need for success.  

“To make the assessments quicker, we ask that when we have those 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 afterwards,” Hiddleston said.

The bank said it would look at business circumstances on a case-by-case basis, and would agree on pricing and repayment terms accordingly.

“We’re committed to doing all we can to support New Zealand businesses during this time of need, while maintaining our responsible lending practices,” an ANZ spokesperson added.  

Kiwibank chief executive Steve Jurkovich, said the announcement represents a “major lifeline” for businesses. He urged business owners to talk to their bank early to help them through. 

“Even if you think you’ve got sufficient cash flow to see you through the initial shock of COVID-19, the financial impacts could be felt for much longer, Jurkovich said.  

For businesses needing cash flow urgently, among Kiwibank’s other options are to put loan payments on hold, change to interest-only payments and take out a temporary overdraft.

“Clients must have exhausted existing Kiwibank facilities before accessing the Business Finance Guarantee Scheme,” Jurkovich added.

More information about what banks are providing and how to apply for a loan under the Business Finance Guarantee Scheme is available on ANZ, Kiwibank and other New Zealand bank websites.

At the start of the COVID-19 level 4 lockdown, early indications are that many businesses are putting a recruitment freeze in-place and holding off on salary increases. 

A business pulse survey taken by Strategic Pay on the week of March 26 showed that based on the responses of 248 Kiwi businesses, over half (59 percent) won’t be hiring in the near future.

Chief executive John McGill said that this was more prevalent in the private sector, followed by not-for-profits.  

“Some organisations made note that they’ll continue recruiting high priority roles but [will] halt low priority roles or redeploy people from within the business that are unable to work to support other areas,” McGill said.

Many of the companies it surveyed said that as they were uncertain about funds and how the company would perform during the crisis, it was too soon to tell whether they could pay salary increases.

“For the most part, organisations in the public sector are unsure.

“The private sector have decided to put these on hold and are waiting to decide,” McGill added.

Many businesses who planned to pay bonuses had already paid them out, 29 percent were yet to decide, 22 percent had put the decision on hold and 13 percent had decided not to pay them.  Around 41 percent of the businesses surveyed said they had no plans to pay a bonus based on 2019 performance.

McGill said that most of Strategic Pay’s clients wanted to do the right thing by their staff, but keeping them on for the full twelve weeks of the wage subsidy paying at least 80 percent of their normal pay required “heroic commitments”.

“While the 'best efforts' clause is there, I think many employers hope their efforts to keep their organisations afloat doesn’t come back to haunt them,” McGill said.