COVID-19 Small Business Cashflow Scheme
Last week the Government announced it will provide interest-free loans for a year to small businesses impacted by the COVID-19 to support their immediate cash flow needs and meet fixed costs.
It will provide assistance of up to $100,000 to businesses employing 50 or fewer full-time equivalent employees.
The Minister of Finance, Grant Robertson, stated “The scheme will provide $10,000 to every firm and in addition $1800 per equivalent full-time employee. Loans will be interest-free if they are paid back within a year. The interest rate will be 3% for a maximum term of five years. Repayments are not required for the first two years.”
Eligibility criteria are the same as for the Wage Subsidy Scheme. The scheme is open to Sole traders and self-employed as well as employers. A reminder of the eligibility criteria is as follows:
- 30% or more decline in revenue compared with last year for any month between January 2020 and the end of June 2020.
- Applications can also be made on the basis of forecast revenue loss within the period of the scheme.
- Employer must pay a minimum of 80% of the employee’s normal wages to qualify for a claim.
- Employers must also have taken active steps to mitigate the impact of COVID-19. For example “engaged with their bank/financial adviser”. A declaration has to be signed to that effect.
Businesses will also have to declare that they are a viable business, that they will use the money for core business operating costs and enter into a legally binding loan contract.
Applications for the cashflow scheme are expected to be open from 12 May 2020 and businesses can apply for the loan payment through myIR on the IRD website.
Business Finance Guarantee Scheme (BFGS)
The Government is also making changes today to the criteria for the previously announced Business Finance Guarantee Scheme, including removing the requirement for a General Security Agreement. We will advise as to further details as they come to hand.
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