Business Finance Guarantee Scheme FAQ

08 September 2021

Updates to the Business Finance Guarantee Scheme were announced on 20 August 2020.  The Scheme (as outlined in our earlier articles) has been revisited to provide a higher level of loans to an increased number of businesses to help in the recovery from the impact of COVID-19.   The aim of the revised Scheme is to support business recovery and growth plans.

Read all the frequently asked questions below. 
Information included in this insight was last updated on 08.09.2020


What is the purpose of the Scheme 


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.


Which banks are offering the loans 


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


What are the eligibility criteria?


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)


How much can I apply for?


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


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

Where can I apply for the loan? 


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.


What can the loan be used for?


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.


Does the Government guarantee absolve the company from providing any guarantees?


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.


How does the Government guarantee work?


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.


Will there be special payment terms or interest on the loan?


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.


Are any sectors excluded from applying?


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


How will I know if I am on my banks watchlist?


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.


What information might I need to supply?


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


How can BDO help you? 


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.

When can I apply for the Loan?


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


BDO can help you with all matters regarding these scheme loans including

  • assessing your business and its ongoing viability
  • gathering the required information to ensure you are providing a robust plan to your bank
  • making an application

Funding towards the costs of providing business plans and cash flows may be available through the Regional Business Partner Network


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