Coronavirus Covid-19: Government announces $ 6.2 billion loan guarantees for SMEs
There are 40 new confirmed cases of coronavirus in New Zealand today. Health Director General Ashley Bloomfield told reporters there were also three probable new cases. There have been 155 cases of confirmed and probable cases, and he said the daily tally will now include probable cases.
The government will provide up to $ 6.25 billion alongside private banks in a new program to try to lend money to small and medium-sized businesses.
Finance Minister Grant Robertson on Tuesday afternoon announced details of a program in which taxpayers will bear most of the risk associated with lending to private businesses.
Businesses with revenues between $ 250,000 and $ 80 million will be eligible for loans of up to $ 500,000 for up to three years.
“The Business Finance Guarantee Scheme will provide short-term credits to cushion the financial hardship of creditworthy small and medium-sized businesses affected by the Covid-19 crisis,” Robertson said in a statement.
Although the regime was broadly similar to Australia’s, the risk was shared equally between the banks and the government. In New Zealand, the government will assume 80 percent of the risk.
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Robertson said he was comfortable with the higher level of risk.
“We are living through an extraordinary time here, and we have to make sure that this loan gets to the people who need it,” said Robertson.
“We felt over the remainder of the discussions that a higher level of Crown collateral would encourage banks to lend to creditworthy companies that have encountered significant difficulties.”
Banks, not the government, will decide whether businesses should be eligible for loans, Robertson said.
“The program takes advantage of the financial strength of the Crown, allowing banks to lend to ease the financial stress of creditworthy businesses affected by the Covid-19 pandemic,” Robertson said.
“We are committed to monitoring this regime and we are prepared to evolve this regime over time if necessary.”
On Sunday, Australian Prime Minister Scott Morrison said Australian $ 20 billion ($ 20.4 billion) would be invested dollar for dollar alongside banks to provide working capital to small and medium-sized businesses.
“Government support will strengthen the willingness and capacity of lenders to provide credit to SMEs with the program capable of supporting $ 40 billion in SME loans,” Morrison said in a joint statement with Treasurer Josh Frydenberg.