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LETS GET DOWN TO BUSINESS.

Question :
Why when I have spent 2k of government money on and Accountant and 50 hours of my own time preparing Cash flows and Budgets with several different turnovers and staffing levels which all show that my business of 12 years which has always made good profits can be viable but needs a cash injection  to trade through has been turned down because my HOUSE Mortgage is with another Bank.I have offered any security they might want against the house ( ie Caveat )  as I have 25% equity on today’s price but they say they are unable to make the loan under the current Govt rules as they don’t have control over the House Asset  ( I would move but fixed interest would mean 17 k of penalties. ) I’m going to aproach BNZ who hold my Morgage business to see if i move business banking to them they can give the loan.   If the govt is backing 80% what may house got to do with it. 

Question submitted 09/05/20 @ 06:35am
Industry: Funding & Finance
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  • Hi,

    The first option to investigate is going to the bank that holds the first mortgage over your personal home and see if they will advance you more funds against the house, using the 25% equity you have available. I’m not sure you will have any success moving your business lending as currently a bank is unlikely to take on distressed lending.

    The reason your business bank will not entertain a guarantee from your house lending entity is they have no control over your house as the first mortgagee controls the liquidation of your house should it be required to pay off business debt.

    You will be eligible for the new SME business loans which is $10k plus $1.8k per employee so make sure you get access to that asap.

    I was a corporate banker for 20yrs and would be more than happy to help you in discussions with your bank, it is often just getting to talk to the right person as they are big organisations.

    If you want a hand with your bank let me know and I’ll send you my contact details.

    Cheers
    Chris

    Hi Calnar,

    Frustrating times, you must be tearing your hair out with all this perceived bureaucracy.

    Not sure when you talked to you bank last, rules did change May 1, new rules can be found here: https://www.business.govt.nz/covid-19/business-finance-guarantee-scheme/.

    One key thing to remember is that the Govt is not guaranteeing loans to the end user, only guaranteeing to underwrite 80% for the bank. Normal lending criteria will apply. “The Government Guarantee does not limit the borrower’s liability for their debt.”

    There are a ton of applications coming in for these loans to banks and they are swamped. Pays to keep hassling them and ideally not taking no for an answer (up to a point of course).

    Chris above would be a good chap to have a call with as he is very experienced, talking to someone who can navigate their way through is important.

    Also remember that there are two types of loans, Small Business Cashflow loan and a Business Finance Guarantee loan. You can apply for both.

    Good luck.

    Greg

      From the Govt Website:

    What is the criteria for the loan?

    Loans will be provided by banks to businesses that have urgent liquidity and bridging finance requirements caused by disruption to business as a result of COVID-19. See also: What loans will not be funded?

    Is the Government guaranteeing the loan?

    No. You will need to provide security for the loan as you would normally. The Government and participating banks have agreed to share the risk in case of default only.

    What kind of security do I need to provide for the loan?

    While banks remain in control of their own lending decisions and may have their own requirements, the Government original expectation that lending over $50,000 would require a general security agreement has been removed.

    If the Government is guaranteeing the loan, why do I need to provide security?

    The Government Guarantee does not limit the borrower’s liability for their debt.
    The Government Guarantee only applies to any shortfall the bank has, after it has exhausted all normal avenues to recover the debt in the event of a default by the borrower.

    Can I have both a Small Business Cashflow loan and a Business Finance Guarantee loan?

    The schemes are complementary. Businesses should evaluate each scheme against their specific needs. The Government has funded specialist consultancy support services to provide advice to businesses who need it. You can use the Boost tool to find out what services are available in your region.

    Hi again,

    Have you looked at the small business cashflow scheme? It might be something that you can draw on.

    This DLA Piper article gives a good summary:

    https://www.dlapiper.com/en/newzealand/insights/publications/2020/05/new-zealand-inland-revenue-releases-criteria-for-the-new-small-business-cashflow-scheme

    Cheers
    Greg

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