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Summary
- The Business Finance Guarantee Scheme (BFGS) will conclude on 30 June 2021.
- The scheme was formed to help SMEs to access credit.
- The New Zealand Government last month decided to include fintech lenders also under the scheme.
The Business Finance Guarantee Scheme (BFGS) is near its close and is likely to conclude on 30 June 2021. The Scheme was formed in March 2020 to help small and medium enterprises (SMEs) to gain access to credit for capital assets, cashflow, and projects related to, reacting to, or recuperating from the blows of COVID-19.
The scheme also promotes banks, non-deposit taking lenders and non-bank deposit takers to lend, where otherwise they may not. The Scheme offers access to government-backed guarantee of up to 80% of the loan’s default risk to participating lenders.
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The lender verifies the amount that can be borrowed and the duration of the period under 1 or more schemes. The maximum value of the loans fluctuates between $500k to $5 million, contingent on the lender up to a maximum period of 5 years.
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Some of the currents participants of the scheme are ANZ, ASB, Bank of China, BNZ, Heartland Bank, Kiwi Bank, Westpac, TSB, Prospa, and Zip Business, etc.
Fintech lenders also included in the scheme in April
The Government had decided last month to include fintech lenders under the BFGS scheme. . The decision is a significant chance to lift the capital flow to SMEs in NZ.
The BFGS scheme had been available to just banks initially but its extension to Prospa and other fintech lenders shows the growing role of the sector in supplying essential working and growth capital to small businesses.
As the country's economy recovers, SMEs have been increasingly searching for money to recruit, expand, and invest in their future. Banks and conventional lenders have historically neglected SMEs, and many continue to struggle to obtain the capital they require to grow.
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Adrienne Church, General Manager of Prospa, stated that the Scheme's expansion served to level the playing field for other lenders, allowing more money to be put into the small business economy more quickly and effectively.
The addition of fintech lenders to the BFGS will help more SMEs to respond or to recover from COVID-19 by hiring new personnel, upgrading equipment, launching new goods and services, and capitalising on new prospects, as per Church.
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Banks and non-bank lenders have lent $2.4 billion in loans via the programme as of May 11.
The Small Business Cashflow Scheme (SBCS), which assists small and medium-sized firms and organisations experiencing a loss of actual revenue as a result of COVID-19, is still active until December 31, 2023.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)
