Small operators eligible for interest free cash in Govt loan scheme

4th May 2020 By Staff Reporter | news@tourismticker.com | @tourismticker

Tourism operators will have access to interest free loans for up to 12 months after the Government announced new measures to help all small businesses affected by the Covid-19 pandemic.

“We are targeting this scheme to those who have a viable business but have been put in a position of not generating any revenue,” finance minister Grant Robertson said.

Grant Roberston

The Small Business Cashflow Loan Scheme will provide assistance of up to $100,000 to firms employing 50 or fewer full-time equivalent employees.

The scheme has two components – $10,000 to applicant firms, plus $1800 per equivalent full-time employee.

For example, a sole trader would receive $10,000 plus $1800; a firm with three full-time employees would receive $10,000 plus $5400; a company employing five people would receive $10,000 plus $9000.

The maximum loan will be $100,000 based on $10,000 plus 50 employees.

Legislation had been passed to facilitate the scheme, which would be available to small firms from 12 May, and administered by Inland Revenue.

Loans would be interest free if they were paid back within a year. The interest rate would be 3% for a maximum term of five years. Repayments were not required for the first two years.

“We recognise that many businesses have had little or no revenue through alert level 4 and level 3. This scheme is designed to give them access to cashflow to meet fixed costs on concessionary terms,” said revenue minister Stuart Nash.

The eligibility criteria was the same as for the Wage Subsidy Scheme. Businesses would also have to declare that they were a viable business, they would use the money for core business operating costs and entered into a legally binding loan contract.

The Government was also making changes to the criteria for the previously announced Business Finance Guarantee Scheme, including removing the requirement for a General Security Agreement – a mechanism normally included to facilitate loan repayments by requiring assets such as a home to be used as security.

“By helping small and medium-sized businesses to pay their fixed costs, in addition to the tax changes, wage subsidy, commercial property measures and consultancy support already available – we now have a substantive package to help these firms and sole traders get through this phase and into recovery,” said Nash.