New Zealand’s banks are offering up to a total of $6.25 billion in guaranteed loans to businesses financially impacted by Covid-19. Eligible businesses can apply to their bank for new lending under the scheme from today.
“Businesses are at the heart of our economy and we know many are doing it tough as a result of Covid-19. We also know we need to work together to get through this. That’s why we are pleased to have reached an agreement with the Government that will help banks provide loans to businesses that have been financially impacted,” says New Zealand Bankers’ Association chief executive Roger Beaumont.
“The Business Finance Guarantee Scheme will provide individual business loans up to $500,000. To be eligible to apply to the scheme businesses must be New Zealand based with an annual turnover between $250,000 and $80 million.
Under the scheme banks will make available new lending to eligible businesses. The loans will be supported by a guarantee in a risk-sharing agreement with the Government. The Government will cover 80 per cent of the risk and banks will cover 20 per cent. That amounts to a total of $5 billion for Government and $1.25 billion for banks.
“Businesses seeking to apply for a loan under the scheme should visit their bank’s website for more information before contacting their bank to discuss their eligibility and the assessment process.
“Banks will follow their normal credit assessment process to see if businesses qualify for the scheme and will take into account the circumstances businesses find themselves in due to Covid-19. That process usually takes approximately ten working days.”
Supported loans are limited to a maximum term of three years, with the exact terms of individual loans to be determined by each bank.
The scheme rules exclude funding certain activities including agriculture, property development and property investment.
“Individual banks will of course continue to offer support to affected businesses outside the scope of the scheme,” says Beaumont.
Banks participating in the scheme include ANZ, ASB, BNZ, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB and Westpac.
Further information about the Business Finance Guarantee Scheme is available on participating bank websites.
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“Banks will follow their normal credit assessment processes to see if businesses qualify for the scheme and will take into account the circumstances businesses find themselves in due to covid-19.”
New Zealand Bankers’ Association CEO Roger Beaumont said banks’ credit assessments typically take 10 working days.
“Businesses are at the heart of our economy and we know many are doing it tough as a result of Covid-19,” said Beaumont.
Roger Beaumont, New Zealand Bankers’ Association chief executive, last week urged people to go online for information first after bank call centres were jammed with people calling through only to find long wait times.
Roger Beaumont, chief executive of the New Zealand Bankers’ Association, said: “While there are obvious advantages for people in need, repayment deferrals may extend the time it takes to repay the loan and will add interest cost
Bankers Association chief executive Roger Beaumont warned anyone thinking of taking the mortgage holiday to carefully consider its costs, as interest would still accrue over the six months.
New Zealand’s retail banks are offering to defer repayments for all residential mortgages for up to six months for customers financially affected by Covid-19.
“We know that some customers are already being financially impacted by Covid-19 and have an immediate need. That’s why the banking industry as a whole is stepping up with this further package,” says New Zealand Bankers’ Association chief executive Roger Beaumont.
Mortgage repayment deferrals mean that affected customers who apply to their bank will not make principal and interest payments on their loans for up to six months. This package is in addition to what banks are already doing individually to provide assistance to affected customers.
“Anyone opting into a mortgage deferral needs to be clear about what this means for them. While there are obvious advantages for people in need, repayment deferrals may extend the time it takes to repay the loan and will add interest cost. So it may not be for everyone.
“It’s important to know that interest on these loans will still accrue, and deferred interest will be added to the principal amount of the loan.
“Banks will assess the suitability for each customer who is asking for a deferral.
“Banks will have different approaches to how they manage the process for customers to opt into a mortgage deferral. Those details, including eligibility criteria, will be available on bank websites.
“Importantly, we’d like to acknowledge the government’s support for this package. At such an extraordinary time we must all stand together to get through this unprecedented challenge to New Zealand,” Beaumont says.
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“Banks will have different approaches to how they manage the process for customers to opt into a mortgage deferral – those details, including eligibility criteria, will be available on bank websites.”
“It’s important to know that interest on these loans will still accrue, and deferred interest will be added to the principal amount of the loan.”