New Zealand’s Finance Minister Grant Robertson announced on 1 April that under the business financing programme, companies will begin to apply for loans. The scheme is a partnership between government and banks (as explained in our article dated 25 March), intended to sustain the New Zealand economy during a pandemic in the COVID 19.
It will provide loans for New Zealand companies to the tune of up to $6.25 billion. The main feature of the scheme is that 80% of the risks of scheme loans are insured by the government while the remaining 20% is borne by the banks.
This tolerance of much of the government’s (taxpayer) risk allows banks to make corporate loans which may otherwise appear too risky and thereby increase the chances of survival of these businesses.
But otherwise the banks must follow a regular lending procedure. The banks have put their application form online to access and compare it, but we expect that the current customers will be given priority by the banks. It appears from the web pages that applications are handled within 7-10 days at least. It also seems that other options for bank financing can first have to be eliminated.
