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Milestone in cash flow support to SMEs

  • Almost $1 billion in interest-free loans for small businesses
  • More than 55,000 businesses have applied; 95% approved
  • Average loan approx. $17,300 90% of applications from firms with ten or fewer staff
  • A wide cross-section of businesses have applied, the most common are the construction industry, accommodation providers, professional firms, and retail
  • 88% of those seeking loans also got support from the Wage Subsidy

A billion dollar milestone is about to be passed as government cash flow support rolls out to small businesses through interest-free loans.

Revenue and Small Business Minister Stuart Nash says small and medium enterprises (SMEs) have reacted enthusiastically to the Small Business Cash flow Loan Scheme in its first fortnight of operation.

“Cash flow is crucial to kick-starting the economic recovery for our small businesses,” Mr Nash said.

“More than 55,000 businesses have applied for around $960 million in interest-free loans. We expect to pass the billion-dollar mark within the next day or so. Around 95% have already been approved and cash usually arrives in bank accounts within five days.

“The interest-free loans have come at just the right time. This is much-needed working capital for small businesses who for a variety of reasons have not been able to approach banks or investors for support. I have received positive feedback about how easy it is to apply online and how fast the loan has arrived.

“Around 45% of applications are from firms with just one employee; 33% have 2-5 staff; 12% have 6-10 staff; and 7% have 11 to 20 staff. Around half of those taking out loans are mature or long-standing firms that have been trading for more than five years.

“Provincial businesses are making good use of the government lending. Tauranga businesses account for 2,528 applications; there are 1,575 from Palmerston North; 1,482 from Whangarei; 1,240 from Nelson, and 1,181 applications from Napier businesses.

“Loans are interest free if repaid within a year. After that the interest rate is 3% for a maximum term of five years. Repayments are not required for the first two years. SMEs employing 50 or fewer staff are eligible to apply.

“I urge business owners to talk to their bookkeeper, tax agent or accountant, or log onto the MyIR portal, to ensure they take advantage of government support as quickly as possible. Applications are due by 12 June but I am seeking advice on extending the deadline given the substantial demand for the loans.

“We’re also boosting cash flow in other ways to help with fixed costs for SMEs. This includes tax refunds, the wage subsidy, commercial property reform and consultancy support. We now have a substantive package to help these firms and sole traders get through this phase and into recovery,” Mr Nash said.

The global COVID-19 pandemic and economic crisis is hitting every nation hard. Outside the $4 billion business support package in Budget20, previously announced support for small businesses includes:

  • Wage subsidies for more than 390,000 businesses to pay 1.6 million staff. More than 210,000 businesses who received direct support were the self-employed, and a further 170,000 businesses employ up to 19 staff;
  • Income relief payments for those who have lost their business or job, up to $490 per week for 12 weeks, tax-free;
  • Tax refunds of up to $3.1 billion through the loss carry-back scheme;
  • Tax breaks worth $2 billion for commercial landlords through changes to depreciation arrangements;
  • $25 million for professional consultancy services through Regional Business Partners;
  • Government departments are taking the lead on prompt payments to SMEs, with a target of 95% of invoices paid in 10 working days. Ministers have now asked top-50 listed companies on the NZX to consider doing the same;
  • Other tax measures allow businesses to get tax write-offs for low-value assets like laptops and phones; remove 95,000 taxpayers from the provisional tax regime; and allow interest to be waived on late payments

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