Government’s SME Cashflow Loan Scheme

On 30 April the Government announced the Small Business Cashflow Loan Scheme (Scheme) which will lend funds of up to $100,000 to businesses employing 50 or fewer full-time equivalent employees.

This announcement is the latest in a number of significant business support measures that the Government has introduced to mitigate the impact Covid-19 is having on the business community.

The Scheme will provide eligible businesses, including sole traders and self-employed people, with a $10,000 minimum loan, and a further loan of $1,800 for each equivalent full-time employee. The loans are interest-free if paid back within 12 months, and subject to interest at 3% p.a. thereafter, for a maximum term of five years. Repayments are not required to be made for the first two years.

These one-off loans are intended to support COVID-19 affected SMEs to address their immediate cashflow needs and meet fixed costs. The Scheme will get cash into businesses straight away, which has not been the case for many of the other business support measures introduced to date. While the various tax measures; the business support funding, the business finance guarantee scheme, will all be hugely beneficial to businesses over time, they do not put cash into the hands of businesses now, when it is needed most.

It is not yet clear whether the Scheme will require businesses to keep named employees employed for the term of their loan. Businesses who apply for the loan will, however, enter into a legally binding contract with the Government and will have to declare that they are a viable business and that they will use the loan for core business operating costs.

Eligibility

The eligibility criteria for the Scheme are the same as for the Wage Subsidy Scheme. To qualify for the Wage Subsidy, a business must:

• be registered and operating in New Zealand;
• have employees legally working in New Zealand, including employees who:
  • have a NZ work visa;
  • have a condition on their NZ temporary visa that allows them to work in NZ; or
  • are international students whose visa allows them to work in NZ;
• have experienced a minimum 30% decline in actual or predicted revenue over the period of any month from Jan 2020 to June 2020, when compared with the same month last year, and that decline is related to COVID-19;
• have taken active steps to mitigate the impact of COVID-19; and
• retain the employees named in their application for the period of the subsidy.

Inland Revenue will administer the Scheme, and applications for the loan payment can be made from 12 May 2020 via myIR.  Inland Revenue will provide a loan calculator for the scheme which will be available here.

Other business support measures

Below is a list of the various business support measures the Government has introduced in the last two months to combat the impact Covid-19 restrictions are having on businesses:

• wage subsidy and leave scheme
• restoring depreciation deductions for non-residential buildings
• increasing the provisional tax threshold from $2,500 to $5,000
• increasing the threshold for low-value asset write-offs
• bringing forward broader R&D refundability
• allowing use-of-money interest and penalties to be waived
• increasing access to the in-work tax credit
• a tax loss carry-back regime
• extending the tax loss continuity rules to include a ‘same business’ test
• accepting late deposits and allowing early refunds for the income equalisation scheme for the primary sector
• business finance guarantee scheme
• funding for professional advice to plan for survival and recovery from the economic shock caused by COVID-19
• extend benefits and pensions paid to New Zealanders stranded overseas due to Covid-19 travel restrictions
• allow Inland Revenue to change due dates, time frames and other procedural requirements for tax returns
• extending the period for zero-rating exported goods
• support for commercial tenants and landlords
• defer the commencement of provisions that restrict the performance of minor surgical procedures on animals during the lockdown so that farmers can continue to perform these.

Detail on these measures is available on the Government’s Covid-19 website.

Have questions?

If you would like to discuss the Small Business Cashflow Loan Scheme, or any of the other business support measures available, please contact your Hayes Knight advisor.