COVID -19 - Small Business Cashflow Loan Scheme
As of 12 May 2020, businesses will be able to take advantage of the Government’s recently announced Small Business Cashflow Loan Scheme (the Scheme).
The announcement of this Scheme by the Government is to provide further support to businesses who are struggling or will struggle as we transition through the Alert Levels.
The Scheme is designed to provide small to medium sized businesses (that employ 50 or fewer staff) with access to a loan of up to $100,000 to assist with fixed costs and cash flow concerns the business is facing.
The eligibility criteria are the same as for the Wage Subsidy Scheme. Businesses will be required to make a declaration, which among other things, includes that:
They are a viable business;
They will use the money for core business operating costs; and
They will enter into a legally binding loan contract.
If a business meets the eligibility criteria, they will be entitled to receive $10,000, plus $1,800 per equivalent full-time employee up to a maximum limit of $100,000.
To assist in repayment, the Government has committed to the loans being interest free if they are repaid within one year. However, in circumstances where the business will not be able to repay the loan within the first year, the Government has announced that an interest rate of 3% will apply for a maximum term of five years (including the first year) and repayments will not be required within the first two years.
Businesses will be able to apply for a loan through the Inland Revenue Department’s (IRD) myIR portal from 12 May 2020. There is an initial one month period for businesses to apply for the Scheme so we suggest that any business that is considering taking up this offer to start their eligibility assessments early.
The IRD has already put information and resources up on their website to assist businesses with their assessment of how much they can borrow. The IRD calculator to assess how much a business can borrow can be found by clicking here.
If your business doesn’t already have a myIR account for your business or organisation, you can set one up by clicking here.
If you want to discuss this Scheme further, or have any questions that may impact your business directly, please don’t hesitate to get in touch with one of our Business or Insolvency Team members who will be able to assist you.