Small Business Cashflow Scheme
We will touch on the Small Business Cashflow Scheme which has been passed through legislation on Thursday 30 April 2020.
Interest Free Loans for Small Business The Inland Revenue will be able to issue loans up to $100,000 to businesses with 50 or fever full time equivalent employees from the 12 May 2020 onwards. Who Qualifies for the Loan?
If you meet the existing Wage Subsidy eligibility criteria, then you also qualify for this loan.
What do you need to also do? You will need to declare that you are a viable business. What can I use the money for? Loan is designed to meet core business operating expenses such as rent, rates, insurance and paying suppliers, but it cannot be passed through to the business owner as either loans or dividends. Breakdown of Loan
The amount of the loan will be $10,000 plus an additional $1,800 per full time equivalent employees. Please note this does not mean every business will be able to apply for $100,000 loan from the IRD, it is dependent on the number of full-time equivalent employees they have on their payroll.
Examples in table below.
Firm Size Base Loan FTE Equiv. Total Loan Sole Trader $10,000 $1,800 $11,800 2 FTE $10,000 $3,600 $13,600 3 FTE $10,000 $5,400 $15,400
Interest Free Period
The loan will be interest free if repaid within one year. If not repaid within one year, the loan will have interest rate of 3% per annum for a maximum term of 5 year. Repayments will not be required for the first two years.
While this is another way to support small businesses with cashflow needs, it is important business owners assess their business viability before applying for this loan. It is also important to mention that IRD will be leading audit process for the Business Cashflow Loan Scheme.
Source: Deloitte
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