What’s going on?
On 12 November 2020, the Government made some changes to the Small Business Cashflow (Loan) Scheme (SBCS). These changes mean more people can apply for loans and gives more freedom as to its use. Read further below to see how it may benefit you.
What are the loan details?
The loan period is still for a maximum of five years with an interest rate of 3%.
The change – if you repay the loan within two years, no interest will be charged! It used to be one!
** UPDATE 18 DECEMBER 2020 - if businesses have repaid their small business loan, they can apply for a new loan, provided all conditions are met.
What can it be used for?
You can use it to pay normal operating costs and to invest in your business, helping it adapt to the impact of Covid. You could update your computer hardware/software if your business has become more cloud-based (or even if it hasn’t). If buying a piece of machinery or equipment is going to improve your business, you could use the loan for that. Added bonus – if the asset costs less than $5,000 (excluding GST), and you purchase it before 17 March 2021, we can claim it as an expense in full to reduce your taxable income!
Your benefit – previously the loan could only be used for operating costs
Can I still apply?
You certainly can! Applications can now be made until 31 December 2023.
The deadline – previously, applications were closed from 31 December 2020.
Hang on – why don’t people already in the SBCS get these changes?
They do! The team at the IRD will update the current terms and conditions automatically. You don’t need to get in touch with them.
OK – what’s the catch?
When you apply for the loan, you still need to meet certain conditions:
- It’s only for businesses with 50 or fewer employees
- Yes – if you’re a sole trader, you’re considered to be an employee!
- Yes – if you’re a shareholder working in the business receiving wages or a shareholder salary, you’re considered to be an employee!
- You had to be in business for at least six months before the application
- You must have experienced a 30% decline in revenue* as a result of Covid
- The maximum you can borrow is $10,000, plus an additional $1,800 per full-time equivalent employee
- You can only apply for the loan once and you’ll get the full loan amount at one time if your application is accepted
Will things change again?
The Government and IRD are working on this together, so yes – things could change.
Sign me up!
You can apply for the SBCS through myIR.
Can’t you do it for me?
Unfortunately, no. Once you are in the SBCS, we will be able to see the transactions and correspondence, but we can’t set it up.
* Measured over a 14-day period in the six months before applying, compared with the same 14-day period from a year ago