Understanding the new interest free loans for SMEs
Here’s what you need to know about the Government’s interest-free loan scheme for SMEs.
To help businesses manage their cashflows, the New Zealand government has announced it will be offering interest free loans for small and medium sized businesses (SMEs).
Here’s how the scheme will work.
What’s being offered?
Eligible firms can access up to $10,000 + $1,800 per equivalent full-time employee in order to help conserve cash during the upheaval of Covid-19.
To be eligible for the loans, you need to:
- Employ no more than 50 staff and
- Declare your operation was viable going into Covid-19 and
- Show your revenue has been reduced by at least 30% because of the virus.
Minister Robertson announced there will be an audit process, conducted by the IRD, for businesses applying for loans.
What are the terms?
Here’s how the loans work in practice:
- To be interest free, you need to repay your loan within a year.
- After this point, the interest rate will be 3% for a maximum term of five years.
- However, repayments are not required for the first two years of this period.
How can I use the loan?
You can use the money to help cover core operating costs like rent or insurance payments. The benefit cannot be passed onto business owners or shareholders.
When and where do I apply?
You need to apply through the IRD, who will be in charge of administering the process.
They will start taking applications from May 12, 2020. At this stage, applications will only be open for one month, but the Government has said it will review this if necessary.
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