More businesses will be able to apply to access bank finance to support them through the COVID-19 response as a result of updates to the Business Finance Guarantee scheme announced today.
After hearing from banks and the business sector, these changes are based on the feedback received. More updates may be made in the future to further improve the scheme.
The Business Finance Guarantee is designed with the Crown taking 80% of the risk of the loans under the scheme to enable banks to provide credit to viable customers where they otherwise may not be willing to do so.
The scheme will now be available to more businesses, achieved by:
- Removing the $250,000 lower borrower revenue threshold,
- Including farmers within the scheme, and
- Moving the date that customers must not have been on banks’ watchlists from 28 February to 31 January, recognising that some companies were impacted by COVID-19 earlier than others (e.g. forestry).
The scheme will be more flexible, achieved by:
- Customers will not have to draw down all existing facilities before applying.
- The term of temporary facilities that can be refinanced into the scheme has been extended from 90 days to 180 days.
While banks remain in control of their own lending decisions and may have their own requirements, the Government expectation that lending over $50,000 would require a general security agreement has been removed.
With other packages including the Government small business loans announced this morning, tax changes, wage subsidy, commercial property measures and consultancy support already available, there is a substantive package to help business get through this phase and into recovery.