The government is significantly expanding the business finance guarantee program to include both agricultural businesses and very small businesses; Also allows banks to take out unsecured loans if they choose to do so

The government is changing the rules of its business finance guarantee program so that more businesses can benefit from bank loans taken out by taxpayers.

In early Friday afternoon, he quietly announced two significant changes to the scheme, through which taxpayers take out 80% of bank loans to qualifying businesses.

Agricultural businesses, which were previously excluded from the scheme, will now be included.

Agricultural credit represents about 14% of bank credit. 65% of this segment is for dairy products, which is considered relatively high risk.

Second, the government is removing the requirement for a “general security agreement” under the regime.

This means that for a loan of more than $ 50,000, a bank will no longer have to “obtain a guarantee from the borrower under a general guarantee contract”.

Banks can still require companies to provide security, however, if they wish.

Late Friday afternoon, the Treasury announced further changes to the corporate finance guarantee program.

Small businesses will now also be able to access loans under the program, as the requirement for businesses to have had a minimum turnover of $ 250,000 in fiscal 2019 has been removed. The upper limit of $ 80 million remains in place.

Borrowers will no longer have to draw on all the existing facilities made available to them by their bank before applying for a loan under the mechanism.

The duration of the temporary refinancing facilities in the system has been extended from 90 days to 180 days.

And the date from which customers should no longer be on bank watch lists has moved back to January 31, February 28, recognizing that some businesses have been affected by COVID-19 earlier than others (e.g. , forestry).

Real estate promotion and real estate investment are among the activities that remain excluded from the system.

In March, Finance Minister Grant Robertson set aside $ 6.25 billion for the program.

He was unable to provide with details of the additional risk taxpayers are taking as the program expands.

Banks: Business Finance Guarantee Scheme useful in the longer term; banks meeting immediate needs now

The Business Finance Guarantee Scheme is separate from the Small Business Cash Loan Program, unveiled Thursday and detailed Friday. Under this program, the government will provide loans to small businesses directly through the Inland Revenue.

Robertson said the business finance guarantee program did not fully meet business needs or government expectations.

Companies complain that they have difficulty obtaining loans under the program.

However, New Zealand Bankers Association CEO Roger Beaumont stressed that the program was useful in helping businesses meet their long-term needs.

“For the immediate needs of businesses, banks have loaned businesses $ 6.1 billion since we went into custody on March 26,” he said.

“It’s a loan outside of the corporate finance guarantee program. And it’s almost as much as the total loan limit under the program.”

Nonetheless, Beaumont welcomed the changes to the program, saying they come “as a result of industry feedback.”

“We hope this means more customers will be able to participate in the program for their longer term needs.”

Beaumont was only notified of the changes just before Robertson announced them.

Robertson said: “Further modifications to the program will also be considered to ensure that it plays a useful role in supporting businesses.”

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