COVID: Small Business Cash Flow Loans

Organisations and small to medium businesses, including sole traders and the self-employed, may be eligible for a one-off loan with a term of 5 years if they have been adversely affected by COVID-19.

Immediate support to small businesses and organisations

The Small Business Cashflow (Loan) Scheme (SBCS) has been introduced to support businesses and organisations struggling because of loss of actual or predicted revenue as a result of COVID-19. They must have 50 or fewer full-time-equivalent employees.

Inland Revenue will administer the payments and repayments of this scheme. Applications will be open until 31 December 2023.

Eligible businesses and organisations are entitled to a one-off loan. The maximum amount loaned is $10,000 plus $1,800 per full-time-equivalent employee.

The annual interest rate will be 3% beginning from the date of the loan being provided. Interest will not be charged if the loan is fully paid back within two years.

Eligibility

To be eligible for the loan, your business or organisation must have 50 or fewer full-time-equivalent employees.

  • You need to have been in business for 6 months

  • You must have experienced a decline of at least 30 percent in actual revenue due to the impact of Covid-19

You do not need to have received the wage subsidy to receive a loan.

The wage subsidy requires sole traders to be physically present in New Zealand, however they can still receive the SCBS loan if they are temporarily away from New Zealand.

Your business must be viable

To be eligible for the SBCS loan your business or organisation needs to be viable and you must have a plan to ensure it remains viable. This generally means the directors or owners have good reason to believe it is more likely than not the business or organisation will be able to pay its debts as they fall due within the next 18 months. Your accountant may be able to provide this advice.

You must keep any evidence of the business or organisation’s ongoing viability at the time of requesting the loan, as we may audit your application.

Evidence might include, for example:

  • A cash-flow forecast for the business or organisation for the short term.

  • A plan for where revenue will come from in future market conditions, and a forecast of those revenues.

  • Financial statements showing the business or organisation has enough resources to sustain itself when including the SBCS loan.

  • Your accountant’s assessment that the business or organisation is viable and ongoing.

Maximum loan

The maximum size of the loan you can get depends on the number of full-time-equivalent employees calculated from wage subsidy funding. It is $10,000 plus $1,800 per full-time-equivalent employee.  The maximum loan is $100,000.  Sole traders can receive a loan of up to $11,800.

You have the option to accept the full loan amount offered or a smaller loan. You can only make one loan application and no amendments can be made after the loan has been applied for.

To determine the number of full-time-equivalent employees - IRD will divide the wage subsidy amount (that you received or would have received if you applied for the wage subsidy for all your employees) by $7,029.60 - the wage subsidy received for one full time employee. The result will be rounded up to the nearest full-time-equivalent employee.

Example: Scott's Signage

Scott's Signage has 8 full-time and 4 part-time employees and would have received $73,036.80 in wage subsidies.

For the purposes of the maximum loan size, Scott's Signage is considered to have 11 full-time-equivalent employees.

$73,036.80 divided by $7,029.60 is 10.4 - rounded up to 11.

Use of the loan

The loan must be used to pay for core operating costs of your business, such as: rent, insurance, utilities, supplier payments, rates etc. The loan must not be passed through to the shareholders or owners of the business.

Receiving the loan payment

Once approved, most applicants will receive their loan payment in full from the IRD within 5 working days. It will be paid to the bank account shown in myIR. You can update your bank account in myIR.

There will be no loan adjustments for any tax debt owed and the loan is not subject to income tax or GST. You will be able to claim deductions for expenditure funded by the loan.

Repaying the loan 

You will have 5 years (60 months) to pay off the loan. The usual IRD repayment options will be available. Later this will include the ability to set up instalments.

Loans will be subject to an annual interest rate of 3% from the date it is provided by IRD. During the loan period, the following general rules apply:

  • If you repay the loan in full within 2 years you won’t be charged any interest.

  • If you do not repay the loan in full within two years, you will be charged interest for the entire term of the loan.

  • Repayments are not compulsory in the first 24 months.

  • Voluntary payments can still be made over this period.

  • After 24 months, you will be required to make regular payments for both the principal and interest.

Applying for the loan

Businesses and organisations can apply for the SBCS loan through myIR. In the ‘I want to’ section of myIR, select ‘Apply for a Small Business loan’. Businesses without a myIR account will need to create one to apply for the SBCS loan.

Applications are open until 31 December 2023.

Log in to myIR, then go to the 'I want to' section and select 'Apply for a Small Business Loan'. Follow the on-screen prompts to complete the application.