Business loan scheme extended

Recent changes have made the Small Business Cashflow (Loan) Scheme even more useful than before, as Brett Crombie explains.

Early last year the government announced the Small Business Cashflow (Loan) Scheme (SBCS) in response to the expected business downturn caused by Covid-19. The scheme is administered by Inland Revenue and provides small and medium businesses with loans of up to $10,000 plus $1,800 per full time employee. Interest is not charged on the loan, provided it is fully repaid within two years. By December 2020, over 100,000 businesses had made use of the SBCS to access around $1.6 billion of loans. Most had gone to businesses in the building and construction sector.

Extension and expanded eligibility

The government appears eager to build on the early success of the SBCS and in December 2020 announced these changes:

Applications can now be submitted up to 31 December 2023

New businesses established after 1 April 2020, which have existed for six months, will now be eligible

Businesses need only demonstrate a drop in revenue of 30% over any 14-day period compared to the same period a year ago

The loan can be used for investment in new equipment or digital infrastructure, and not just for core operating expenses

Businesses can draw down a second loan, provided they have repaid the original loan.

Like the original scheme, to access the SBCS a business must be viable, which may require a cashflow forecast or accountant’s assessment.

Recommended actions

With the expanded eligibility criteria in effect from February 2021, it’s worth taking a second look at the SBCS to see if your business could benefit. Now is a good time to set out your business goals and projections for the next 12 months; and the availability of interest-free business funding could be a key factor to help achieve them.

About the author: Brett Crombie is a Chartered Accountant, qualified lawyer and former Inland Revenue tax investigator. He is the owner of Straightedge Accounting, which provides tax, accounting and business advisory services. Contact Brett on 021 301 022 or email brett.crombie@straightedge.nz

Disclaimer: This is general information only and not intended to be treated as professional advice. It is recommended you seek professional advice before acting.

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