Today’s Advisory introduces an additional service available to you, our clients. Strawbridge is a now a member of the Regional Business Partner Network (RBPN) a division of New Zealand Trade and Enterprise. This enables us to provide our clients with subsidised business advisory
services to deal with the current crises. See below for the details.
The government and major banks have finalised the details of the Banking Support Package. We advise you to see the details of this package below and determine how it can help you and your business. We encourage you to talk us and your banker and discuss your situation.
The government has also firmed up on the Essential Workers Leave Support package to assist employer meet the cost of Essential Workers who are forced to take leave because of the Covid-19 pandemic. We include a link to the Work and Income information below.
Keep well. We are here to assist you.
The Strawbridge Team
- Financial Assistance for Business Continuity Advice
- New Zealand Governments Banking Support Package – COVID-19
- Update on Essential Workers Leave Support
1. Financial Assistance for Business Continuity Advice
Many of you will want or need more specific support to guidance to navigate through this crisis. Cashflow planning, disaster recovery planning (and strategy in general) are critical now to help businesses through the current crisis. Perhaps more importantly, the right advice and planning, will give certain businesses a great head start when it comes to the opportunities that will arise when the lockdown ends, and things return to normal(ish).
We are working with the Regional Business Partner Network (RBPN) a division of New Zealand Trade and Enterprise, which has made limited funding available to help businesses obtain appropriate advice to help them through this initial part of the COVID-19 crisis.
Strawbridge is a registered professional advisor with the Regional Business Partner Network so can provide you with professional advice and assistance under the subsidy scheme RBPN provide. Our team will be talking to you about this assistance package and discuss whether it will suit you and your business. If you wish to discuss this opportunity now, please call your Client Advisor through our office phone number or email them directly.
2. New Zealand Governments Banking Support Package – COVID-19 Background
About two weeks ago the New Zealand Government announced that it, the Reserve Bank, and most registered banks would work together to ensure that banks could continue to support New Zealanders through this crisis.
This package is a real positive as the global recovery from the Global Financial Crisis of 2008-09 was slowed due to businesses not being able to obtain credit.
The terms and conditions of individual offerings are largely up to the individual banks, but the features of the Government-backed scheme are as follows:
- Individuals whose incomes are affected by COVID-19 can take a 6-month mortgage holiday from principal and/or interest. This is being done to try and avoid people losing their homes.
- The Reserve Bank has significantly reduced the capital ratios for the banks. In simple terms this allows the banks to lend more without needing further deposit holders. This is a welcome change as several banks were already starting to pull back from business lending over the past 6 months as they were nearing their capital ratio limits.
- The Crown will guarantee 80% of business loans to SMEs under a scheme that will apply to businesses with turnover of $250,000 to $80m. The limit of these loans will be $500,000 and for a maximum of 3 years. The banks are expected to set competitive rates. The Government is underwriting these loans, because it is natural that the banks would not want to expose themselves to undue risk in the current economic climate. Since the Government is underwriting 80% of the risk, the Government is also expecting some relaxation of lending criteria.
This scheme is underwritten by Government but is managed by a customer’s usual bank. It seems to be a condition of these packages that it is only available for a bank’s existing customers.
The banks have been offering mortgage deferrals to individuals under the Government scheme for over a week. In fact, most banks were offering customers interest-only packages before the Government-backed scheme was announced.
Anyone considering taking a mortgage deferral needs to be aware that deferring interest will cause the amount of the loan to increase as interest will continue to accrue. For this reason, we suggest that anyone needing to take a mortgage holiday should try and do so by converting a loan to interest only, rather than a full mortgage holiday, as the size of the loan will not increase over while a loan is interest only.
The final details for the business loan scheme have only just been settled, and applications for those loans only opened late last week.
The consistent message we are hearing from banks is that these Government-backed business loans are not going to be handed out like lollies. The customer will have to exhaust other funding facilities first and show that the strain on the business was caused by COVID-19. The messaging we are hearing from banks is that if a business was struggling or in arrears before COVID-19, then don’t even bother. On the other hand, the banks are already showing a willingness to support customers genuinely affected by COVID-19 but they generally require relatively significant supporting information.
The decision on whether to lend in a particular case will be made by the bank using their lending criteria. Therefore, an application will need to be supported by financial and other information.
As applications only opened last night, the bankers we have talked to are not 100% sure what information they will require. However, the initial information coming from the banks is that they will need more information than normal, not less. As these loans are only for a 3-year term, a robust recovery plan seems to be a necessity in most cases.
If you think that you may need additional banking support, and you are not already talking to us about your financial position and recovery plan, then we suggest that you reach out to us as soon as possible.
Business loans – Excluded sectors
The Government has excluded specific sectors from the business loan packages. A few of these are truly odd (like whale meat processing and production of nuclear weapons), but the following excluded sectors will be highly relevant to our clients:
- Property development; and
- Property investment; and
- Core agriculture (the likes of horticulture, viticulture, and contractors supporting agriculture are not excluded).
We understand that there is serious campaigning by the Banking Association to include commercial property investment, so watch this space.
The main banks in New Zealand are all offering assistance to their customers, in line with the Governments Banking Support package. To view the individual offerings from your respective bank, please click on the links to the eight main banks below:
We recommend that if you are in the position that you now, or in near future will need assistance from your bank to get you and your business through the disruption caused by the Lockdown, you should talk to your bank and discuss what assistance they can give you. We are already working with clients in securing suitable packages from their bankers. You are welcome to call us and discuss what is available and how we can assist.
3. Work and Income – COVID-19: Essential Workers Leave Support
Work & Income has firmed up on the Essential Workers Leave Support package. This provides assistance to employers engaged in what is deemed “Essential Services” who have Essential Workers who are unable to work for the following reasons:
The essential service worker/s:
- are at higher risk if they get COVID-19, and Ministry of Health guidelines recommend they stay at home while we’re in lockdown (and potentially longer),
- has come into contact with someone who has COVID-19 and must self-isolate for 14 days (as required by Ministry of Health guidelines),
- have tested positive for COVID-19 and are required to remain off work until they’ve been cleared by a health professional to be released from self-isolation, or
- have household members who are at higher risk if they get COVID-19 and Ministry of Health recommend the worker also remains at home to reduce the risk to them.
Please refer to the following Link for detailed information on the package: