Mixed response to Business Finance Guarantee Scheme

Last week, finance minister Grant Robertson raised the size of loans available under the scheme to $5 million, up from $500,000. Funds can now be used for capital investment and general purpose borrowing, rather than just cash flow issues.

The Government move was designed to boost the popularity of the $6.25 billion programme, set up to give SMEs low-cost loans. The Government underwrites 80% of the loans. 

However, the scheme has only loaned $150 million so far, to fewer than 780 customers. 

Lenders including Kiwibank and ASB hailed the extension of the scheme last week. ASB said it would "save jobs and businesses", while Kiwibank said it was "a big helping hand for Kiwi businesses". 

Hamish Patel of Mortgages Online believes there will be a greater uptake of the expanded scheme.

"Previously you could only use it for cashflow – or a possible dip in cashflow. Now you can also use it for capital purchases. And the amounts are much larger. I reckon this will work nicely if the Government also spends more on infrastructure. You could have contractors using this scheme to purchase equipment to be able to deliver on larger projects," he added.

While the expansion of the scheme has been welcomed, advisers say it has made little difference to clients so far. 

One Auckland adviser said the application process was difficult. 

"I have not had any clients take up the scheme. I assisted one client to get paperwork together to apply through the BNZ which was not an easy process."

One Wellington-based adviser offered warnings about the programme. He said a client had been approved for the scheme and decided not to take it. The application later "affected the client's ability to do an owner-occupied build". 

The adviser said another applicant was forced to add their partner to their home loan application, "which wasn't in the original plan".

"The key point is that taking that loan can affect personal borrowing requirements. So businesses really need to look at the bigger picture if they take it," the Wellington adviser added.