From May 2020 loans were made available to businesses via the Small Business Cashflow Scheme.
 
As mentioned in our Business Support Update in March 2022, the Government increased the base loan amount from $ 10,000 to $ 20,000 for new loan applicants and for existing participants.   Applications for eligible new or top-up loans are open up to 31 December 2023.
 
For those who took up the loan when applications first opened in 2020, the two-year interest-free period of the loan will be coming to an end. Inland Revenue, who administer the loans, are currently issuing letters to businesses which include repayment schedules commencing end of June.
 
NB: failure to commence repayments could trigger an “Event of Default”, which can result in Default Interest Rates (IRD use of money interest, currently 7.28%) being charged on top of the standard 3% which is applied from the first day of the third year of the loan.

Under the scheme, loan participants have 5 years to pay off the loan (the “Loan Period”).   Loans are subject to the annual interest rate of 3% from the first day of the third year of the loan.
 
During the loan period, the following general rules apply:

• If the loan is repaid in full within the first 2 years, no interest will be charged.
• Repayments are not compulsory in the first 24 months.
• Voluntary payments can be made any time.
• After 24 months, a loan borrower will be required to make regular payments for both the principal and interest.

Example:
Business A takes out a loan in May 2020 and has a balance owing at the end of the 24-month interest-free period (May 2022).
The business must either repay the loan in full or commence monthly repayments from June 2022.

To clients subject to the SBCS repayments we recommend:

• If it is 2 years since you received your loan, check if you have received a letter from IRD for the loan repayment plan and contact the IRD if you have not.
• Set up regular standing payments based on the repayment plan. Remember to use the correct references when making payments.
• You can pay by internet banking, direct debit, or a credit or debit card.
• Make voluntary repayments if possible.
• Finally, if you can’t meet the payments, or need any assistance, please talk to one of our team.

More information on the loan scheme can be found on the IRD website here.
 

If you are unsure what financial support could best assist your business or what tax treatment applies to any of the payments that you may have already received, please give us a call on 07 5779689.  We are here to help.

The PKF Tauranga Team