The Business Finance Guarantee Scheme (BFGS) concluded on 30 June 2021, with scheme loans no longer being available.
A BFGS loan must have been approved, signed and documented by 30 June 2021 for inclusion in the scheme – however it does not have to be drawn down. Although the BFGS has concluded, lenders remain ready to help if your business needs finance. You should in the first instance discuss your business needs with your usual lender.
The Business Finance Guarantee Scheme supported the provision of scheme loans to viable businesses. It encouraged banks, non-bank deposit takers (non-banks) and non-deposit taking lenders to lend where otherwise they may not by the Government taking up to 80% of the loan’s default risk. Borrowers remain liable and must pay back the debt, with interest, in the usual way.
What the Business Finance Guarantee Scheme provided
A term loan or revolving credit facility may have been available for a business (which can be a company, sole trader, partnership or trust) that needed credit for cashflow, capital assets and projects related to, responding to or recovering from the impacts of COVID-19.
The scheme comprised a range of registered banks, non-banks and non-deposit taking lenders. Participants were:
- Bank of China
- Heartland Bank
- Nelson Building Society
- Speirs Finance Group
- UDC Finance
- Zip Business
Business Finance Guarantee Scheme: Frequently Asked Questions
Is the Business Finance Guarantee Scheme a grant?
No. The scheme supported the provision of loans to businesses through participating banks, non-banks and non-deposit taking lenders. Scheme loans need to be repaid with interest, in the usual way.
When was the scheme available?
Businesses could apply to the participating banks, non-banks and non-deposit taking lenders for a BFGS loan that was approved, signed and documented by 30 June 2021 for inclusion in the scheme.
Can I defer payments?
The repayment schedule and commercial terms are agreed with the lender. Contact your lender if you need to discuss repayment terms for these loans.
Is the Government guaranteeing the loan?
No. The Government and participating lenders have agreed to share risk only in the case of default, that is, if the scheme loan is not repaid as required. You may need to provide security for the scheme loan, although this is not a Government requirement.
If my business defaults on a scheme loan, what happens?
If your business defaults on a scheme loan, the lender must take action that it considers commercially reasonable to recover the debt. They can still make a claim to the Crown for 80% of the shortfall even if they have agreed to write off, cancel or not recover the scheme loan debt and/or any other indebtedness.
Can I have both a Small Business Cashflow loan and a Business Finance Guarantee Scheme loan?
Yes. The schemes are not exclusive and the Small Business Cashflow Loan remains available. More information is available from Inland Revenue.
What happens if I am unable to repay the loan?
Borrowers are fully responsible for repaying the scheme loans. If a borrower defaults, the lender will follow its default processes to recover the debt.
If a borrower defaults, how much of the loan amount is paid by the Crown?
The Crown will pay 80% of any loss the lender incurs on a defaulted scheme loan, after they have completed their default processes to recover the debt.
How does the Government ensure the banks, non-banks and non-deposit taking lenders are complying with the terms?
The Treasury has oversight of their compliance through a robust monitoring and reporting process.