Practical guide: how to apply for government-backed small business loans , a round-up of the major banks' offers

Here are the arrangements New Zealand's major banks have made for this scheme, which we obtained as soon as they became available:

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ANZ

• Additional lending backed by the government's Business Finance Guarantee Scheme is available to New Zealand businesses with turnover between NZ$250,000 and NZ$80,000,000.
• Contactless debit card transaction fees are waived for small business customers until 30 June.
• Loan restructuring fees are waived.
• International funds transfer fees are waived for overseas payments made through ANZ Direct Online before 30 June.
• If you meet the hardship criteria, you can withdraw business term deposits early without a reduction in interest.
• Fixed base rates for 6-month and 1-year business term loans are reduced by 40% per annum.
• A reduction of 75% per annum in floating business term loan base rates has already been announced.
• Purchase interest rates on all Visa business credit cards are reduced to 95% per annum until 30 June.

 

ASB

• Businesses based in New Zealand with annual turnover between NZ$250,000 and NZ$80,000,000.
• Eligible businesses can borrow up to NZ$500,000.
• The loan must be repaid within three years.
• The following products have been introduced for customers seeking greater savings and new lending facilities:
• Access emergency funding of up to NZ$200,000 through a temporary overdraft facility lasting 180 days.
• Access up to 200,000 in business working capital.
• Eligible customers experiencing hardship can withdraw term investment funds early.

 

Westpac

• Business assistance loans will be available under the Business Finance Guarantee Scheme to help businesses meet liquidity and bridging finance needs arising from closures caused by Covid-19. Loans of up to $500,000 are available.
• The scheme will initially apply to approved loans applied for between the scheme's commencement date and 30 September 2020.
• The maximum loan term is 3 years.
• The scheme applies only to new loans.
• This loan is like any other loan: both principal and interest must be repaid.
• If we can offer you alternative finance on normal commercial terms, we would be happy to do so.

We may need to charge fees. You may also need to instruct your solicitor to help us put any necessary security arrangements in place.

 

BNZ

The scheme is available to all eligible New Zealand businesses affected by COVID-19 with annual turnover between NZ$250,000 and NZ$80,000,000. Each eligible business can apply for a single loan of up to NZ$500,000.

• Depending on your circumstances, the loan term can be up to three years, at a special floating interest rate of 0% per annum.
• Funding is limited and available only to eligible businesses.
• Loan availability is subject to certain additional conditions.
• Businesses affected by COVID-19 can apply for loans under the scheme from Thursday 2 April until all scheme funding has been allocated. Loans can be drawn down on or before 30 September 2020.
• Loans must primarily support the operating expenses of businesses disrupted by COVID-19. Capital expenditure (Capex) must not exceed 5% of the loan principal drawn down.
• We require the usual security arrangements, including a general security agreement (GSA) and guarantees where applicable.
• With a few exceptions, you must draw down your existing lending facilities before using a BFGS loan.

 

Drawing on many years of industry experience, the Huarong lending team offered its interpretation of the Business Finance Guarantee Scheme: BFGS loan applications are open to all small and medium-sized businesses affected by the pandemic with turnover in the 2019 financial year between NZ$250,000 and NZ$80,000,000, excluding certain industries such as property development and investment, agriculture and tobacco production. In practice, however, each bank will have its own assessment criteria, and businesses applying should also weigh up their options. For example, businesses less affected by the pandemic or with sufficient cash reserves may not need to apply, because loan funds can only be used for operating costs such as wages, rent and utilities, rather than business expansion. Borrowing is always a double-edged sword: used well, it can help a business; inappropriate borrowing can leave a company with more debt. Customers are therefore advised to discuss their situation with their accountant and lending manager, realistically assess their ability to repay, and make a sound judgement.

 

The team stressed that although this is a government support scheme, banks still treat these loans as commercial lending, with repayments and interest payable under a commercial contract. Although the government and banks share the credit risk, failure to repay on time will still affect the applicant's credit record in the long term.

He therefore believes that preparing in the following areas will improve applicants' chances of securing a loan:

• Provide the bank with the business's background, how long it has been operating, and the applicant's professional experience.
• Demonstrate to the bank the future market and growth prospects for the business's industry.
• Provide the bank with strong financial statements from previous years.
• Provide the bank with a detailed business plan explaining how the loan will help the business overcome its temporary difficulties and further increase profits in future.
• Businesses in industries facing a severe short-term impact and potentially lengthy recovery should ideally demonstrate their strength within the industry and why they are indispensable.
• Applicants can offer collateral that retains its value, such as property.

 Links to the major banks are provided below:

The Treasury has yet to release the final details of the Business Finance Guarantee Scheme. We will continue to monitor developments and update the information as it becomes available.