I have a whole new appreciation for Daycare workers and parents with more than one child!! My lord.
Today I wanted to talk about two of the financial options that are being made available through the government and banks for businesses – my business partner Peter talks about the private options here. There is plenty out there and it is really important that you take advantage of these.
Wage Subsidies
The MSD has provided to all, a more or less ‘no questions asked’ access to a wage subsidy for all businesses. This amounts to $585.50 p/w for full time employees or $350.00 per week for part time (cut off for full time is 20+ hours). The payment is made in a single lump sum for a 12 week period into your business. It is simple to apply online and in most cases is being paid out within 24 hours – no questions asked. Do be aware though that everyone will be subject to an audit at some point so don’t game the system.
This is a really great initiative as the entire premise of this is to keep people employed. If the government manages to do that the theory is that the financial security of every day NZ’ers and those most vulnerable will be protected. Please if you do apply for this make sure you put it to good use – help those in your business.
Business Finance Guarantee Scheme
This is the government's biggest lever to pull in regards to helping SME’s around NZ. It leverages the Crown’s financial strength to allow banks to lend to SME’ to ease the financial stress on solvent businesses through this tough time.
In simple terms, the government is guaranteeing up to 80% of losses on these loans for banks, therefore exposing the bank to only a 20% of their normal risk of loss.
The way this will be put into action is allowing banks to lend up to $500k per SME (turnover of your company must be between $250k and $80M). Those loans can be over a maximum 3 year term and are expected to be provided at competitive and transparent interest rates.
The goal of this is to ensure banks continue lending despite the very obvious increase in credit risk associated with the shut down. It is the government standing behind their actions (the shut down) and saying ‘hey, we will wear the consequences of our actions’.
Why not 100% of the risk? Well, the banks are still required to carry some credit risk and have some skin in the game so that they apply this appropriately otherwise it would simply be a free pass to profit for the lenders. Please do not think it is just a given that you will get this loan – it needs to be presented well and carry with it some real merit.
In summary, the government has taken some great steps for business owners around NZ that will be affected by this crisis. Credit where it is due, albeit I am sure that any government would have done the same.
There are other options to talk through with your bank and other more traditional products that could help you out through this tough time. There are also other lenders out there. If you want to talk through your options please get in touch, we are really keen to help everyone out and always happy for a chat.
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