The Government, retail banks and the Reserve Bank recently announced a major financial support package for businesses affected by the economic impacts of COVID-19.
The package includes a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses, to protect jobs and support the economy through this unprecedented time. The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and expected to be provided by the banks at competitive, transparent rates. The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks. The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. In addition, the Government has decided to reduce banks ‘core funding ratios’ from 75% to 50%, further helping banks to make credit available.
For the official Beehive release, please visit: https://www.beehive.govt.nz/release/mortgage-holiday-and-business-finance-support-schemes-cushion-covid-impacts.
The specific details have not yet been finalised, but we will update you when the Government make these public in the coming days. In particular, we will be monitoring whether the package will extend to provide short term relief to businesses that are unable to pay their debts when due under existing facility arrangements and whether banks will continue to enforce borrowers obligations under General Security Agreements during this period. In the meantime, if you have any questions about the COVID-19 Business Finance Guarantee Scheme and what it means for your business, please get in touch with our business advice team.
All of the latest Government information for businesses in relation to COVID-19 can be found on the business.govt.nz website: https://www.business.govt.nz/news/coronavirus-information-for-businesses/. We suggest that this is reviewed on a regular basis to ensure that you have the most up to date information.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required