business finance guarantee scheme nz

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Business Finance Guarantee simplified and expanded to support COVID-19 recovery

• Hon Grant Robertson

Changes to simplify and expand the Business Finance Guarantee Scheme will allow banks to make more loans available under the Government’s 80% guarantee.

Finance Minister Grant Robertson said the Treasury and banks have been working to update the scheme based on feedback from banks and their customers. Changes include longer loan terms and a higher maximum loan amount covered by the scheme.

“The Government has put a number of measures in place to support businesses to invest as the economy recovers from the impact of the global COVID-19 pandemic. The Business Finance Guarantee encourages banks to support their customers, by offering an 80% Government guarantee over the loans issued under the scheme,” Grant Robertson said.

“We’ve been open about the fact that the original scheme has seen a lower uptake than we would have liked, with $150 million lent to 780 customers to date. The changes announced today should allow the banks to be more flexible with the scheme.

“Changes needed to be made and banks have come to the table and agreed to the modifications. Extending what the loans can be used for, including capital investment, means banks can use the scheme to help more viable businesses respond to this 1-in-100 year shock.

“We’ve also listened to concerns from businesses around requirements for a personal guarantee. While banks will still have their own lending requirements and make their own lending decisions, the Government has clarified that the Crown does not require a personal guarantee on lending made under the BFGS. The final decision is still up to individual banks, however.”

Key changes announced today include:

• Maximum loan limit increased from $500,000 to $5 million
• Maximum term of loan increased from three years to five years
• Criteria for borrowing extended from liquidity support/bridging finance to enable general purpose borrowing, including for capital investment, for businesses affected by COVID-19
• More medium-sized firms can access these loans with revenue limits extended from $80m to $200m per annum.
• Scheme available until 31 December 2020
• BFGS loans can be used to re-finance up to 20% of a borrower’s existing indebtedness
• Watchlist criteria relaxed
• Personal guarantee requirement clarified – there is no personal guarantee required by the Crown. The Crown will pay a claim in event of default where no personal guarantee has been provided
• Discretion available for banks to act outside Supported Loan Policies, Practices, and Processes.

The Business Finance Guarantee Scheme supports the provision of bank loans to viable businesses, encouraging banks to lend where otherwise they may not, by the Government taking on the default risk for the bank of up to 80% of the loan. Borrowers are still liable and must pay the debt back, with interest, in the usual way.

The Treasury’s website, Treasury.govt.nz , has comprehensive information on the Business Finance Guarantee Scheme, including today’s changes. Businesses seeking to access the scheme should contact their bank. Participating banks are ANZ, ASB, BNZ, Heartland Bank, Kiwibank, SBS Bank, TSB, Bank of China and Westpac.

What Is the Business Finance Guarantee Scheme in New Zealand?

By Matthew Bartlett

Updated on March 23, 2021 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

What Is the Business Finance Guarantee Scheme?

How the business finance guarantee scheme works, what businesses are eligible for the business finance guarantee scheme, key takeaways, frequently asked questions.

Covid-19 has undoubtedly brought many challenges to small and medium-sized enterprises (SME). The Government’s Business Finance Guarantee Scheme aims to assist SMEs needing credit for cash flow and other financial problems. Under this scheme, your business can borrow up to $5 million for a five-year term. There are multiple lenders in the scheme, and the government assumes 80% of the default risk. However, your business still needs to pay back the loan per normal, along with interest. 

This article explains the Business Finance Guarantee Scheme, how it works in practice, and which businesses are eligible for the scheme. 

The scheme encourages banks to offer a term loan or revolving credit facility to small or medium businesses in need of credit for cash flow to respond to the impacts of COVID-19. An SME can include a sole trader , company, partnership or trust . The government takes up to 80% of the loan’s default risk . The aim is to encourage banks and lenders to support lending to businesses that might be in financial trouble.

All New Zealand registered banks and non-bank deposit takers (non-banks) are eligible to apply to join the scheme. Current participants include ANZ, ASB, BNZ, Heartland Bank, Kiwibank, TSB, Bank of China, Westpac and the Nelson Building Society. You can apply for up to $5 million from each except for the Nelson Building Society. As a non-bank, the limit is $3 million. 

Note: the Government guarantee does not limit your business’ liability for the debt. If your business defaults on a scheme loan, the lender will follow its default processes to recover the debt. 

F irstly, you must s ubmit a loan application through one of the scheme’s lenders (such as the major banks). Note that your business does not have to draw down existing loan facilities before applying for a Business Finance Guarantee Scheme loan. As part of the approval process for a scheme loan, the lender sets out key details such as:

• the amount and term;
• the interest rate;
• whether you need to provide documents that show your business can afford to repay the debt, such as a cash flow forecast or business plan; and
• whether it will rely on existing or require new security and guarantees to support the debt.

There are limits on how you can use the money from the Business Finance Guarantee Scheme loan. Your business cannot use it to fund:

• dividends or on-lending;
• refinancing of amounts owing in excess of the agreed limits under other loans and facilities with your bank; and
• re-financing or repaying more than 20% of your business’ existing debt.

Note: You can use the Scheme’s loan to fund dividends or on-lending to the borrower and each person, if any, who has guaranteed the borrower’s obligations to the lender. 

Note that not all businesses are eligible for the Business Finance Guarantee Scheme. The scheme targets small to medium-sized business in New Zealand. To be eligible to apply for credit from a bank:

• you must base your business in New Zealand; and 
• your business must have annual revenue of $200 million or less in its most recent financial year. 

Alternatively, you may wish to apply for credit from a non-bank . In that case, your business must have annual revenue of $50 million or less in its most recent financial year. 

Moreover, residential or commercial property developers are not eligible for the scheme. Neither are property investors, local authorities or council-controlled organisations. Your business also cannot be on its bank’s credit watchlist as of 30 September 2019. 

The Business Finance Guarantee Scheme provides a government-backed term loan for businesses struggling financially in the wake of COVID-19 and the associated lockdowns. If your business is eligible, you can apply for a term loan or revolving credit facility through a scheme lender. Likewise, the government will take up to 80% of the loan’s default risk. The scheme aims to encourage banks to lend to businesses that may be in financial trouble with the pandemic. 

If you want to know more about the Business Finance Guarantee Scheme, contact LegalVision’s business lawyers on 0800 005 570 or complete the form on this page.

The scheme supports banks and other lenders offering a term loan or revolving credit facility to businesses in need of credit for cash flow to respond to the impacts of COVID-19. Eligible business structures include companies, sole traders, partnerships or trusts. The government takes up to 80% of the loan’s default risk to encourage banks and lenders to support lending to businesses that might be in financial trouble.

The scheme aims to provide for businesses’ current and up-coming operating cashflow needs (including things like rent and staff expenses) and capital assets and projects related to, responding to or recovering from the impacts of COVID-19.

Yes, businesses still have to pay back loans per this scheme in the normal way, with interest. The government guarantee merely provides some assurance to banks and lenders that they will get their money back if your business defaults on the debt.

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About the business finance guarantee scheme.

-As published by Business.govt.nz

The Government, retail banks and the Reserve Bank announced a major financial support package for businesses and home owners affected by the economic impacts of COVID-19.

Business finance guarantee scheme

About the business finance guarantee scheme.

Government has launched a business finance guarantee scheme for small and medium-sized businesses, to protect jobs and support the economy. The Crown, in partnership with participating approved banks, will support targeted new loans (including increases to existing limits) to eligible businesses, as a response to difficulties caused by COVID-19.

Under the scheme, businesses with annual revenue between $250,000 and $80 million can apply to their banks for loans up to $500,000, for up to three years. The scheme will offer a total of $6.25 billion in loans to New Zealand businesses.

Government is guaranteeing 80% of the risk, while the banks are covering the remaining 20%. A normal lending process will be followed by the banks, which will make the lending decisions. Further details can be found on the banks' websites.

More information on the announcement can be found at Beehive.govt.nz.

Business finance guarantee – applications open (external link) — Beehive.govt.nz

Government and banks are implementing a $6.25 billion business finance guarantee scheme for small and medium-sized businesses, to protect jobs and support the economy. The Crown, in partnership with participating approved banks, will support targeted new loans (including increases to existing limits) to eligible businesses, as a response to difficulties caused by COVID-19.

Your bank will decide whether your financing can be supported under the scheme through its normal credit assessment process. Your bank will also take into account your circumstances due to COVID-19.

I own a business – am I eligible?

To be eligible to apply for loans under the scheme your business must be New Zealand-based and with an annual turnover between $250,000 and $80,000,000. If you or your business was on your bank’s credit watch list at the outset of the COVID-19 crisis, you will not be eligible for a loan under the scheme. See also excluded activities below.

Is the business finance guarantee scheme a grant?

No. The scheme supports the provision of new loans to businesses through a participating bank. Any loans will need to be repaid with interest, in the usual way.

When will the scheme be available?

Customers are able to apply to banks now. Details are on each individual bank's website.

Can I defer payments?

The repayment schedule will need to be agreed with your bank. Your bank will explain to you the repayment terms for these loans.

How do I apply?

Talk to your bank to discuss your financing needs. They will advise whether your financing can be supported under the scheme. Details are on the banks’ websites.

Who decides if my business qualifies for the loan?

Your bank will decide whether your financing can be supported under the scheme. To see if you qualify for a loan under the scheme, your bank will follow its normal credit assessment process. This process will be modified to enable the bank to give effect to the scheme and to allow the bank to look through the economic cycle to sensibly take account of the uncertainty of the current economic conditions caused by COVID-19.

How much can I borrow?

The facility limit for an individual loan will be a maximum of $500,000. However, the maximum amount your bank is prepared to lend to you will be determined by your bank.

What can loans be used for?

The loans are intended to provide for businesses’ current and upcoming operating cash flow needs, including things like rent and staff expenses.

What are the interest rates for the loans?

Interest rates will be determined by the banks under their normal lending criteria.

What is the criteria for the loan?

Supported loans will be provided by banks to businesses that have urgent liquidity and bridging finance requirements caused by disruption to business as a result of COVID-19.

What will the loans not fund?

A supported loan will not be available to fund:

• capital assets/projects other than business as usual expenditure which does not exceed 5% of the principal amount of the loan
• dividends to be distributed outside the Borrower’s guaranteeing group
• re-financing existing debt advanced before March 16th
• on-lending outside the Borrower’s guaranteeing group, or
• excluded activities (see below).

Activities excluded from the loan scheme:

• property development and property investment
• manufacture of cluster munitions civilian automatic, semi-automatic firearms, magazines or parts and anti-personnel mines
• manufacture or testing of nuclear explosive devices (NEDs)
• manufacture of tobacco
• processing of whale meat
• recreational cannabis
• agriculture (but for the avoidance of doubt, agriculture doesn't include horticulture, viticulture, aquaculture or services to agriculture)
• any other activity notified by the Crown in writing to the approved banks, with the effect from the date of that notification (or such later date as set out in the notification).

How long do I have to repay the loan?

Supported loans are limited to a maximum term of three years. However, the exact terms of individual loans will be determined by each bank.

What happens if I am unable to repay the loan?

Borrowers are fully responsible for repaying the loans under the scheme. If borrowers default on payments, banks will follow their usual default processes.

Which banks are participating?

All New Zealand registered banks are eligible to apply to join the scheme. Banks participating in the scheme include ANZ, ASB, BNZ, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB and Westpac.

Is the scheme available through other lending institutions?

For the scheme to be established at pace, initial applications were limited to New Zealand registered banks as they are directly supervised by the Reserve Bank of New Zealand. Non-Bank Deposit Takers (such as credit Unions and Building Societies), are primarily supervised by their Trustees. The Treasury are now considering whether the scheme could be opened up to other participants.

Can I apply directly to the government for a loan?

No. Applications for a loan under the scheme must be made to a bank that is participating in the scheme.

What if my bank declines my application – where else can I get support?

Government has introduced a range of measures to support businesses and individuals. More information on available support can be found on the COVID19.govt.nz website.

Financial support (external link) — COVID19.govt.nz

What is the time period for applying for a Supported Loan?

Loans will be available under the scheme until 30 September 2020.

If customers default, how much of the loan amount is paid to the banks?

The Crown will pay 80% of any loss incurred by a bank on a loan it makes under the scheme, after the bank has completed its normal enforcement procedures.

No. Only registered banks will be able to be part of this scheme.

How will we ensure banks are complying with the terms?

The Treasury will have oversight of the compliance of participating banks through a robust monitoring and reporting process.

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Covid-19 support: government business finance guarantee scheme.

Apply for support

Please note

The business finance guarantee scheme (bfgs) concluded on 30 june 2021, with scheme loans no longer being available. for more information please visit the treasury website . , key information.

The purpose of these loans is to help New Zealand businesses facing hardship as a consequence of COVID-19 to do one or more of the following:

• To respond to the impacts of COVID-19;
• To position themselves for recovery from the impacts of COVID-19; or
• To recover from the impacts of COVID-19.
• Maximum loan per eligible business up to $5,000,000.
• The loan is for a maximum of 5 years and must be repaid over this time period.
• Please note this is a loan and will add to the costs of running your business. As with any other loan, you remain responsible for repaying 100% of the loan and interest. You should not apply for an amount that you cannot afford to repay.
• We will require usual security arrangements - please ask us for further details.

Industry exclusions

We are not permitted to make Business Finance Guarantee Scheme Loans available to:

• a local authority, a council-controlled organisation or a council organisation for the purposes of the Local Government Act 2002; or
• anyone who is classified by us in the follow categories: residential property investor or developer and commercial property investor or developer.

In addition, we are not permitted to make Business Finance Guarantee Scheme Loans available to anyone involved in:

• The manufacture or distribution of recreational cannabis
• The processing of whale meat
• The manufacture of cluster munitions, anti-personnel mines, tobacco, and civilian automatic and semi-automatic firearms, magazines or parts
• The manufacture or testing of nuclear explosive devices
• Any activity which is illegal in New Zealand

In addition, loans can not be used for:

• Distribution of dividends or on-lending outside the customer's guaranteeing group
• Refinancing more than 20% of your existing debt with us. There are certain exceptions to the 20% limit - please contact us to discuss

Options if you're not eligible

Find out more about the number of ways we're supporting our business customers ., asb business hub need help jumpstarting your business with content about digitising your business and managing your cashflow, through to managing the impact of covid-19 on business and how to optimise and create efficiencies, the asb business hub is here to help you. the hub also includes a range of customer stories, digitisation guides and discounted offers from our partners, such as xero and myob., check it out, what type of support do you want to apply for.

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Big changes to the New Zealand Business Finance Guarantee Scheme

The Government-backed Business Finance Guarantee (or BFG) scheme has been an epic failure. The scheme was too restrictive and there was too much red tape. The Government set aside $6b+ for the scheme when the scheme was announced. However, to date, only $150m has been lent to 780 customers.

Today, the Finance Minister has announced some much-welcomed extensions to the scheme.

What has changed:

• The scope of the loans has expanded from supporting COVID-19 impacted cashflow to supporting businesses respond to, reposition and recover from the impacts of COVID-19
• The maximum loan amounts have increased from $500k to $5m; and
• The loans can now be used for capital expenditure.
• The maximum loan term has been extended from 3 years to 5.
• There is now an ability to refinance other debt under the scheme.
• The turnover cap for businesses has been expanded from $80m to $200m.
• There are no establishment or early repayment fees.

The funding available under the scheme is limited. Applications need to be made by 31 December 2020. More detail can be found here: https://treasury.govt.nz/information-and-services/new-zealand-economy/covid-19-economic-response/measures/bfg

The loans still do not apply to residential or commercial property investment. We think the Government has missed an opportunity here as a housing shortage looms with the significant number of New Zealanders returning.

How to apply

Like the original scheme, applications are made through the participating banks (ANZ, ASB, BNZ, Heartland Bank, Kiwibank, SBS Bank, TSB, Bank of China and Westpac). Normal credit processes apply, so if you intend on applying you will need to pull together information to support your application. What the bank will require will vary case by case, but we suggest at a minimum they will want your most recent financial statements and up to date forecasts/budgets (ideally three-way).

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