In making loans under the Business Finance Guarantee Scheme the banks were bound by the terms set by the Treasury, Bankers Association chief executive Roger Beaumont said. “The rules require banks to have customers provide security for loans under the scheme. Banks are responsible lenders. The loans are not intended to fail, which is why lending and eligibility criteria apply.
“However, banks have quite independently loaned $6.9 billion to business customers in the four weeks since March 26.”
Banks say they’re here to help but can’t help every business in every sector. “If the business case doesn’t stack up or isn’t justifiable, well that’s when it gets really hard and really challenging,” said New Zealand Bankers’ Association chief executive Roger Beaumont.
The Bankers’ Association said so far $28.9 billion worth of new loans or restructured loans had been agreed with close to 36,000 customers.
New Zealand’s retail banks are offering a range of relief options to small business customers financially affected by the Covid-19 pandemic, including interest-only loan repayments or temporarily deferring all loan repayments in some cases.
“There are many small businesses that are being severely impacted by Covid-19. Quite a few of them are sole traders. They make up an incredibly important part of the New Zealand economy.
“Banks are offering a range of options to small business owners that may help with their particular circumstances,” says New Zealand Bankers’ Association chief executive Roger Beaumont.
“Some small business owners who are affected by Covid-19 may be able to move to interest-only repayments on their loans to help get them through or temporarily defer all loan repayments.
“Your bank can help you work through relief options that best meet your particular circumstances. For example, moving to interest-only repayments may work well for some, while, where eligible, deferring all loan repayments may work better for others in immediate need.
“Any small business owner seeking to make changes to their lending needs to be clear about what this means for them. For loan repayment deferrals in particular, it’s important to note that interest on these loans will still accrue, and deferred interest will be added to the principal amount of the loan.
“Loan repayment deferrals are not ‘holidays’. That’s not an accurate description and may mislead some customers.
“We encourage small business owners to contact their bank as soon as they have concerns about their financial position. Business owners will be the first to know how they’re doing. The sooner you contact your bank, the better placed they are to offer practical support.”
More information about options for small business customers is available on bank websites.
Small business relief options that banks may offer include:
- Restructuring loans to reduce repayments, for example extending the term of the loan, temporarily moving to interest only repayments, and in some cases deferring all repayments temporarily
- Providing new business loans, including loans under the Business Finance Guarantee Scheme
- Deferring mortgage repayments for up to six months
- Consolidating loans to help make repayments more manageable
- Providing access to short-term funding.
More information about how banks are helping customers through Covid-19 is available at: https://www.nzba.org.nz/consumer-information/covid-19/banking-industry-response-to-covid-19/.
The latest data on how banks are supporting businesses through the pandemic is available here: https://www.nzba.org.nz/consumer-information/covid-19/business-lending-data/.
Other relief available to small business owners through government initiatives includes:
- Employer Wage Subsidy Scheme
- Tax relief for businesses
- Redundancy Support
- Information for sole traders.
Further useful financial support information is available on the official Covid-19 website at: https://covid19.govt.nz/individuals-and-households/financial-support/.
ENDS
As businesses around the country race to prepare for life under Covid-19 Alert Level 3, 1 NEWS can reveal since the lockdown started banks have lent more than $6.3 billion to businesses.
“This proposal would also add to the range of support our banks are already offering affected customers to help them get through. For example, banks have to date allowed around 100,000 customers reduce repayments on loans worth $33 billion, and completely defer repayments on loans worth $17 billion.”
“The fact that banks have lent $5.5b to businesses since we went into lockdown clearly shows they’re lending where they can. They still need to be responsible lenders and not everyone looking for a loan will meet the lending criteria,” Beaumont said. None of that $5.5b loaned by banks since March 26 forms part of the business finance guarantee scheme.
Data released by the New Zealand Bankers’ Association yesterday showed that since the lockdown began on March 25, the nation’s trading banks had provided 13,559 businesses with new loans totalling $5.5 billion, moved to either interest only or reduced principal repayments and interest on $17.4 billion of existing loans to 13,549 businesses, and that a further 3,053 businesses had deferred all repayments on $1.6 billion of loans.
The New Zealand Bankers’ Association welcomed the move, and said it lined up with other Reserve Bank initiatives to free up the financial system at this extraordinary time.