Government considers extending deadline for low-interest loans as claims approach $1b

Tuesday, 26 May 2020

Revenue Minister Stuart Nash is seeking advice on extending the deadline for loan applications under the small business cashflow scheme beyond June 12.

Small businesses and the self-employed have now claimed almost $1 billion in 'low or no interest' government loans that have been offered to help them through the coronavirus crisis.

Revenue Minister Stuart Nash, drawing attention to the impending 'milestone', could not comment on whether the uptake had been greater or less than the Government had expected at this stage of the scheme.

'Ministers did not have estimates for how many applications were expected at the 14-day mark so can't say if today's result is more or less than expected – uptake was always going to be entirely dependent on how many applied and whether they sought the full amount,' a spokeswoman for Nash said.

But Nash said he was seeking advice on extending the deadline for loan applications beyond June 12 because of the 'substantial demand'.

More than 55,000 businesses had applied for about $960m of the loans since applications opened for the 'small business cashflow scheme' on May 12, Nash said.

* Chamber welcomes package to support cashflow needs of small business

The Government's low or no interest loans scheme for small businesses is being managed by Inland Revenue.

* Government offers small firms zero and low-interest loans up to $100,000**

'We expect to pass the billion-dollar mark within the next day or so.'

Stuff's calculations are that if all small businesses and sole traders qualified for the loans — which the vast majority would — and if they took up their full entitlement, up to about $7b of loans could be provided under the scheme.

The eligibility criteria are essentially the same as those for the wage subsidy scheme, meaning companies and the self-employed can claim the loans if they experience a drop in revenues of at least 30 per cent in any month between January and June, due to the coronavirus.

About 70 per cent of employees in the private sector — including those employed by large firms — are covered by the wage subsidies, meaning eligibility for the Government's small business loans is likely to be very broad.

The loans are administered by Inland Revenue and are intended to help meet businesses' 'immediate cashflow needs' and fixed costs such as rent.

The most companies can borrow is $10,000 plus an additional $1800 for each full-time employee they have, so firms employing 50 staff could apply for a maximum loan of $100,000.

Interest is payable at a rate of 3 per cent a year but any interest will be waived if firms pay back the loans within a year.

Nash urged business owners 'to talk to their bookkeeper, tax agent or accountant, or log onto the MyIR portal to ensure they took advantage of government support as quickly as possible'.

Former National Party leader Simon Bridges had proposed replacing the scheme with generally far more generous but more tightly-targeted grants and zero-interest loans, also skewed towards small businesses, that he expected to cost $8b.