Government announced tangible help for SME businesses: Small Business Cashflow Loan Scheme
Today, the Government has finally announced some tangible help that many SME businesses have been waiting for – a new Small Business Cashflow Loan Scheme.
The main purpose for this latest Government measure is to provide immediate cashflow to keep as many viable businesses afloat as possible.
As information will be used by Inland Revenue and shared with Ministry of Social Development for audit purposes, please seek advice before applying. Should the business prove not eligible, it needs to repay the loan immediately.
On the face of it though, it is certainly a timely shot in the arm for many business owners to help with their working capital though many commentators suggest it should be a grant rather than a loan.
Here is a summary of the key facts and what we know thus far.
Eligibility
Only firms employ no more than 50 full-time employees (FTE) can apply.
The firms must meet the Wage Subsidy Scheme criteria plus an additional Business declaration that the business is viable when applying for the loan.
As a reminder, the criteria to qualify for the Wages Subsidy, businesses must demonstrate:
A minimum 30% drop in actual or predicted revenue that is related to COVID-19.
It has taken active steps to mitigate the impact of COVID-19.
It has retained employees for the period of the subsidy and pay them at least the wage subsidy amount
Loan Conditions
The loans can only be used for core business operating costs (e.g., rent, rates, insurance, utilities, supplier payments) This means you cannot use it to fund owner’s drawings or salary or refinancing any shareholders loan
Loan Terms
The maximum loan term is 5-years with no repayment expected in the first 2-years.
There is an incentive. If the loan is fully repaid within the first year, it will be interest-free otherwise there will be a 3% interest rate charge from second year onwards.
How does it work
This Loan Scheme is Government backed; no security is required from the borrower.
Inland Revenue will administer and audit the Loan Scheme.
There is a legally binding loan contract signed between the borrower and the Government, via Inland Revenue.
Inland Revenue’s decision to approve or decline the application is final. It is not disputable.
All information received will be shared with the Ministry of Social Development. This means MSD can use this information as part of their audit on the applicant’s utilisation of the Wage Subsidy money.
When can I apply?
The application process will start from 12 May 2020.
You will only have 1-month to apply i.e. before 11 June 2020 unless the Government decides to extend the application period.
How much can you borrow?
It largely depends on the number of full time employees you have in the firm. Every firm can apply for $10,000 base amount and in addition $1,800 per equivalent full-time employee.
To illustrate
How much can I borrow example
We’re here to help
The partners and staff at Withers Tsang can help and support you through the Small Business Cashflow Loan Scheme.
Please call on us 09 376 8860 or email for assistance.
