Originally Posted by
Snoopy
The jump in the use of both the IRD borrowing scheme and bank assisted borrowing scheme is so recent, it won't have been reflected in the published Heartland results as yet.
With the Business Funding Guarantee Scheme (BFGS) (80% government guaranteed) ostensibly capped at $6.5billion, but only taken up to $1.3billion there is a lot of small business government funding available that is yet to be signed up for. The uptake on this scheme has been extended to June 2021. The average loan size under the scheme has been on the rise, hitting $541,993 at EOCY2020. Nevertheless $1.3billion is apparently only 0.8% of NZs business and agricultural loans.
We also have the Small Business Cashflow Loan Scheme (SBCLS) via the IRD with $1.7billion lent so far ($10,000 base loan plus $1800 for every full-time employee up to 50 employees). The average loan size was $16,265 at EOCY2020, with a maximum available of $100,000. In February, businesses will be able to get loans to invest in new equipment and digital infrastructure as well as operational expenses. Businesses have until December 31, 2023 to apply to the Inland Revenue for loans under this scheme. These loans are interest-free if repaid within two years. And a 30% loss of business over just a 14 day comparative period is now all that is needed to qualify. Just going for the annual holiday this year should do the trick.
The last disclosed O4B Heartland loan balance was $155m (PR2020 slide 16). So there is plenty of latent BFGS and SBCLS latent liquidity to wipe this O4B business unit out. The only people taking out O4B loans with Heartland in the future would have to be utter fools. Surely the increased availability of government backed business loans is terrible news for existing commercial lenders, the likes of Heartland especially?
SNOOPY