Business Finance Guarantee Simplified And Expanded To Support COVID-19 Recovery

Changes to simplify and expand the Business Finance
Guarantee Scheme will allow banks to make more loans
available under the Government’s 80%
guarantee.

Finance Minister Grant Robertson said the
Treasury and banks have been working to update the scheme
based on feedback from banks and their customers. Changes
include longer loan terms and a higher maximum loan amount
covered by the scheme.

“The Government has put a
number of measures in place to support businesses to invest
as the economy recovers from the impact of the global
COVID-19 pandemic. The Business Finance Guarantee encourages
banks to support their customers, by offering an 80%
Government guarantee over the loans issued under the
scheme,” Grant Robertson said.

“We’ve been open
about the fact that the original scheme has seen a lower
uptake than we would have liked, with $150 million lent to
780 customers to date. The changes announced today should
allow the banks to be more flexible with the
scheme.

“Changes needed to be made and banks have
come to the table and agreed to the modifications. Extending
what the loans can be used for, including capital
investment, means banks can use the scheme to help more
viable businesses respond to this 1-in-100 year
shock.

“We’ve also listened to concerns from
businesses around requirements for a personal guarantee.
While banks will still have their own lending requirements
and make their own lending decisions, the Government has
clarified that the Crown does not require a personal
guarantee on lending made under the BFGS. The final decision
is still up to individual banks, however.”

Key
changes announced today include:

· Maximum loan limit
increased from $500,000 to $5 million

· Maximum term
of loan increased from three years to five years

·
Criteria for borrowing extended from liquidity
support/bridging finance to enable general purpose
borrowing, including for capital investment, for businesses
affected by COVID-19

· More medium-sized firms can
access these loans with revenue limits extended from $80m to
$200m per annum.

· Scheme available until 31 December
2020

· BFGS loans can be used to re-finance up to 20%
of a borrower’s existing indebtedness

· Watchlist
criteria relaxed

· Personal guarantee requirement
clarified – there is no personal guarantee required by the
Crown. The Crown will pay a claim in event of default where
no personal guarantee has been provided

· Discretion
available for banks to act outside Supported Loan Policies,
Practices, and Processes.

The Business Finance
Guarantee Scheme supports the provision of bank loans to
viable businesses, encouraging banks to lend where otherwise
they may not, by the Government taking on the default risk
for the bank of up to 80% of the loan. Borrowers are still
liable and must pay the debt back, with interest, in the
usual way.

The Treasury’s website, Treasury.govt.nz,
has comprehensive information on the Business Finance
Guarantee Scheme, including today’s changes. Businesses
seeking to access the scheme should contact their bank.
Participating banks are ANZ, ASB, BNZ, Heartland Bank,
Kiwibank, SBS Bank, TSB, Bank of China and
Westpac.

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