FEATURES • SME LENDING
Advisers face SME loan challenge Despite a raft of measures to kick-start SME business lending, clients have found it tough since the pandemic. How can advisers tackle the problem? BY DANIEL DUNKLEY
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s Covid-19 swept across New Zealand and the government enforced its first lockdown in March, Prime Minister Jacinda Ardern and Finance Minister Grant Robertson began their efforts to rescue the economy. A massive fiscal stimulus package and monetary policy support from the Reserve Bank were designed to help individuals and small businesses through the crisis, but months on, not everyone feels like they have received support from the financial sector. In late March, the government and banks introduced a $6.25 billion business finance guarantee scheme to help small and medium sized firms through the crisis. The Crown agreed to take 80% of the risk of the loans, while banks took the remaining 20%. In November, the government extended the scheme’s interest-free period from one to two years, and extended the scheme by three years. Despite the public support for businesses, advisers say their clients have struggled to obtain business financing since the pandemic. Commercial business financing has been difficult to come by, brokers say,
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despite government and Reserve Bank measures to stimulate business lending. Sole traders, and individuals borrowing against residential property, have found it easier to get a loan during the global crisis. According to many advisers and local businesses, the government’s business loan scheme has been too slow in reacting to SMEs’ needs. Accessing the scheme through the major banks, mum and dad businesses have been forced to provide detailed Covid recovery plans to their lender, and hand over forecasts based on figures at the depths of lockdown. Leading advisers say business clients are being made to jump through hoops by the banks, with lenders nervous around backing SMEs in the middle of the Covid crisis. They say lenders are asking business owners for accounts and forecasts two years ahead. Advisers said NZ’s largest bank, ANZ Group, was putting borrowers under the greatest scrutiny. Banks across the board are asking for detailed financials around the past six months, with some basing their decisions on post-lockdown trading figures.
‘Banks in general remain risk averse and pessimistic about the market and borrower stability, despite being encouraged to lend, and the evidence that the market has not retracted as they predicted’ _ Geoff Bawden
