The COVID-19 small business cashflow lending arrangement

Today, as expected, IRD has released important details relating to the Loan Scheme announced by the Government. This is a scheme that enables businesses to borrow $10,000 plus $1,800 for each full-time equivalent employee, up to $100,000 (50 employees).

Applications open to apply under this scheme today May 12th, and close June 12th, 2020. IRD advises that funds should be received within five working days of applying.

The criteria for applying are

• The same eligibility as for the wages subsidy scheme, i.e. having experienced a decline in revenue of 30% or more during a month this year due to the effects of COVID-19, be an eligible employer, have a New Zealand business and have taken active steps to mitigate the effects of COVID-19.

• Having a viable business, including a plan to ensure the business remains viable for a period within the next 18 months. The evidence of viability may be audited. We can help develop a plan or review the viability of your business if you’re not sure. Access to Government funding for business advice to help model cash-flow, staffing levels and understand financial plans may be available through the Regional Business Partner Network. We can help you apply.

Full-time employees

The portion of the loan per eligible employee is based on the employees covered by the wages subsidy or those employees for whom you could have applied on behalf of for the wages subsidy. You do not have to had received the wage subsidy to receive a loan.

Full-time employees are determined based on the wages subsidy amount, i.e. the wages subsidy amount entitled to divided by $7,029.60 a full-time employee counts as in the wages subsidy calculation. So if there were three part-time employees, for which you received $4,200 each or $12,600, you’d have two full-time equivalent employees as the result will be rounded up to the nearest full-time equivalent employee.

Applying for the Loan

Applications open May 12th. You need to make the application. We as your tax agent (or any other professional who acts for you) while being able to help you are not allowed to apply on your behalf. This is consistent with all loan applications as your bank would have the same requirements that the loan is made by you.

We understand that you need a myIR logon for your business to access the application through the IRD website.

This is a loan, not a grant or subsidy, so you’ll need to make the final determination whether to apply or not.

In applying for the loan, you need to confirm your eligibility, confirm your business is viable, confirm you’ll use the loan to pay for core operating costs and not pass the proceeds through to the business owners for their own private use and other items on the loan application. You have to be 18 years or older to apply. 11th

Repaying the Loan

If the loan is repaid in full within the first year, no interest applies. No repayments are due in the first 24 months, but the loan must be paid in full within five years.

If you would like to discuss your eligibility for the loan or whether you should apply, please get in contact with us.

For more information please see the links below.

Full details on the loan from IRD (valid at May 11th  2020)

The full terms and conditions of the loan from IRD (valid at May 1st 2020).

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