Business Finance Guarantee Scheme FAQ

The purpose of the BFG scheme is to get vital funds through to New Zealand businesses to allow them to recover from the impact of COVID-19.

The Government guarantee allows businesses to leverage the Government’s balance sheet as guarantor for the loan.

The updates announced on 20 August are intended to provide businesses with more capital for recovery and to allow investment to support growth plans.

All the major banks in New Zealand are able to lend funds to NZ businesses who meet the criteria. 

The Banks participating in the scheme are

• ANZ
• ASB
• BNZ
• Heartland Bank
• HSBC
• Kiwibank
• SBS
• TSB
• Westpac

Any business that has been or expects to be impacted by COVID-19, that is:

• A New Zealand-based business
• Has an annual turnover of up to $200m at the end of its 2020 financial year
• Operates in a sector that is not excluded under the scheme (see below).
• Not on your bank’s credit watch list as at 31 January 2020 (for retail customers) or 30 September 2019 (for non-retail customers)

A maximum loan of  $5,000,000 is available, which can be drawn down in one loan or a number of loan. Your Bank will determine the maximum amount you can borrow.

As with any loan, you should only borrow what you can repay.

Loan term of up to 5 years (maximum term will be determined by your bank)
 

You should make contact with your usual banking representative.  Most of the banks will require you to be an existing customer to apply for the loan.

The loan can be used to for operating expenses while the business deals with the disruption of COVID-19. 

The loan can now also be used capital assets and projects to support responding to, and recovery from the impacts of COVID-19.

The loan cannot be used to pay dividends or for on-lending outside borrower’s guaranteeing group.

Loans cannot be used to re-finance or repay more than 20% of your businesses existing debt and cannot be used to repay a loan advanced after 16 March 2020 or due to mature on or before 31 December 2020.

No. The company and possibly its directors will still need to provide security, probably including personal guarantees over personal assets. 

The requirement by the Government for the Bank to require a general security assignment (GSA) for loans over $50,000 has been removed from 1 May 2020, but in some cases the Bank may still require a GSA if they don’t already hold one.

The Government guarantee does not absolve the business from repaying the loan and providing guarantees. The guarantee is for the benefit of the lender, not for the business that borrows the money (other than to encourage banks to make loans that they may not otherwise have made). The business does not directly benefit from the guarantee and remains responsible for repaying the loan and interest.

If the business defaults on the loan to the Bank, the Bank will first attempt to recover the entire loan amount from the business and its Guarantors and, if unsuccessful, it will then recover up to 80% of the shortfall from the Government.

Yes the loan will need to be repaid with interest in the usual way.  Your bank will determine the  interest rate under their normal lending criteria.

It does not appear that the banks will provide the borrowers with special interest rates, processes or payment terms.

Banks have however come up with individual relief packages which provide flexibility with regards to existing repayment terms, interest costs and fees. These include (but are not limited to); the ability to defer existing loan repayments, waive establishment fees and various other concessions. You will need to explore these with your individual bank.

Most business sectors are eligible under the scheme, however certain sectors were purposely excluded

• Property development
• Property Investment
• Tobacco manufacture
• Processing of whale meat
• Recreational cannabis
• Manufacture of specified munitions and firearms

Talk to your bank and establish if you are on their list and if you were a retail customer or non-retail customer to establish if one of the watchlist dates apply to you.

You need to understand the impact of the virus on your business and how you would use any funds borrowed.

While bank requirements might differ depending on your Bank and your circumstances you should expect to provide

• Your last set of financial statements for the business
• A copy of your most recent tax return
• A cash flow forecast detailing your income and essential expenditure for at least 3 months and what a return to more normal business might look like over 2-3 years.
• A personal statement of positon

Your usual BDO adviser will be able to help you

• Review your trading position before the COVID crisis and what has happened to your business since the pandemic hit.
• Consider and review your plans for the future
• Identify any assumptions you might need to make regarding financial and operating matters.
• Prepare a business plan for the recovery of your business including cash flow forecasts.
   

The Guarantee scheme loans are open up till 31 December 2020.