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Businesses will be able to borrow much more and for longer through a Government-backed scheme, after changes were made to boost interest in the scheme.
On Thursday Finance Minister Grant Robertson announced that the size of the loans available under the Business Finance Guarantee Scheme would be raised from up to $500,000 to $5 million.
In other changes the terms of the loans would be increased from three to five years, larger businesses will be able to draw the loans, and the funds can be used for a wider range of purposes.
Announced in March, the $6.25 billion scheme was designed to encourage business lending, with the Government underwriting 80 per cent of the loan.
However the scheme saw little take up, with banks blaming the Treasury for requiring them to obtain a general security agreement before approving the loan, while certain sectors such as agri-business were excluded.
Today Robertson said just $150m had been lent to 780 customers, just over 2 per cent of the limit of the scheme.
"We've been open about the fact that the original scheme has seen a lower uptake than we would have liked," Robertson said in a statement.
"The changes announced today should allow the banks to be more flexible with the scheme."
Robertson said Treasury and banks have been working to the changes to the scheme based on feedback from banks and their customers.
"Changes needed to be made and banks have come to the table and agreed to the modifications. Extending what the loans can be used for, including capital investment, means banks can use the scheme to help more viable businesses respond to this 1-in-100 year shock."
The latest changes further clarify that the Crown does not require a personal guarantee on the loans, with the decision on what security to require falling to the banks.
The changes were welcomed by the banking sector.
"We think expanding the criteria should make it more relevant for businesses in need at this time," New Zealand Bankers' Association chief executive Roger Beaumont said in a statement. "Widening the scheme criteria further supports the supply of credit to businesses in need. Uptake will ultimately be driven by demand from businesses."
ASB, which said it had lent $40m under the scheme, said the latest move "will save jobs and businesses".
The changes announced on Wednesday include, raising the maximum loan limit from $500,000 to $5 million, lengthening the term from three to five years.
The criteria for borrowing has been extended from liquidity support/bridging finance to "general purpose borrowing, including for capital investment, for businesses affected by Covid-19".
Larger businesses can access the funding, with the maximum revenue raised from $80m to $200m. Businesses will be able to use the loans to refinance up to 20 per cent of its existing debt.
The changes also clarify that no personal guarantee is required by the Crown.
"The Crown will pay a claim in event of default where no personal guarantee has been provided," Robertson's statement said.