Labour plans to extend the small business loan scheme rolled out during the COVID-19 pandemic by three years, making the first two years interest-free, at a cost of about $1.5 billion.
Businesses with 50 employees or fewer are currently entitled to a loan of $10,000 interest-free for the first year, and depending on the size of the business, the loan can be extended to as much as $100,000.
The scheme, launched in May, provides a base $10,000 loan to a small business and an additional $1800 per full-time employee, so a sole trader would get the base $10,000 plus $1800, leaving them with an $11,800 loan.
When the interest-free period is up loans are subject to an annual interest rate of 3 percent.
It was set up to help companies pay operating costs such as rent or insurance during the COVID-19 economic slump. It was extended once to July 24 and extended again to December 31, and now Labour wants to extend it even further.
Labour would extend the Small Business Cashflow Scheme for three years, pushing the interest-free period out to two years, and would investigate permanent financing for small businesses.
By the first week of September, around 94,500 small businesses - most of them micro-businesses employing five or fewer staff - had borrowed almost $1.6 billion under the scheme. The average loan was around $16,500.
The small business loan scheme sits alongside the Business Finance Guarantee Scheme, which encourages banks to support their customers, by offering an 80 percent Government guarantee over the loans issued under the scheme.
Recent changes to the scheme include increasing the maximum loan limit from $500,000 to $5 million and increasing the term of loan from three years to five years. The scheme is available until December 31.
Labour also plans to reduce how much money small businesses are forced to pay for contactless payment, by regulating bank service fees, which it says would require a law change.
Retail NZ has highlighted how New Zealand retailers are paying nearly twice the fee that banks charge Australian retailers. Major banks did voluntarily suspend fees during the earlier COVID-19 outbreak but have since reinstated them.
"Retailers are estimated to pay on average $13,000 more than their Australian counterparts each year on merchant service fees. This needs to change," Labour's small business spokesperson Stuart Nash said on Tuesday.
He said contact-less payment gives customers and businesses "greater peace of mind" as the country works to eliminate the coronavirus.
Labour's small business policy:
- Interest-free small business loans extended by three years, two years interest-free.
- Regulate service fees for contactless payment.
- Provide more support for digital transformation of small businesses.
- Promote digital commerce like e-invoicing.
- Try to maintain New Zealand's status as number one for ease of doing business.
- Work with tax agents and software providers to overhaul the accounting income method (AIM) available to individuals and companies with a yearly turnover under $5 million. Labour thinks it's too complex and difficult to use.
Labour plans to encourage businesses to use digital technology by investing $75million in new digital training courses for small and medium businesses (SMEs) with up to 20 staff.
Labour also plans to create a new $2500 Digital Training Voucher to cover the cost of digital training through trusted advisor organisations such as Chambers of Commerce.
How does it compare to National?
The National Party has proposed allowing Kiwis who have lost their job since March to be able to withdraw $20,000 from KiwiSaver to start a business.
National has also proposed $10,000 per new full-time employee to business owners. They would get an upfront payment of $5000 and the rest would be paid out after the new worker had completed 90 days.