First Cabinet decision supports small business
The first Cabinet decision of the new Labour Government announced on 9 November 2020 was a 3-year extension of the Small Business Cashflow Loan Scheme and a provision of up to 2 years interest-free to support small businesses as the government accelerates its economic response to COVID-19.
A summary of the changes is as follows:
- Currently, no interest is charged if the loan is repaid within one year. This will be increased to 2 years.
- Currently, the loan can only be used for core operating costs. This will be broadened so that the loan can be used, for example, on capital expenditure.
- Applications for the loan can now be made until 31 December 2023, an extension of 3 years.
Inland Revenue will make these changes by unilaterally changing the terms and conditions of new and existing loan contracts. Although it is yet to be confirmed, it is anticipated that this will happen by 31 December 2020.
At this stage, all other aspects of the loan scheme remain in place, including:
- it is for businesses with 50 or fewer full-time-equivalent employees
- they must have been in business on 1 April 2020 and have experienced a 30% decline in revenue as a result of COVID-19 restrictions
- the maximum amount that can be borrowed is $10,000 plus $1,800 per full-time-equivalent employee and only one amount can be drawn down, and
- the loan period is for 5 years and the interest rate is 3% from the date of the loan being provided.
Source: First Cabinet decision supports small business, Beehive website, 9 November 2020, accessed 10 November 2020.