However, the original wage subsidy scheme won’t be extended beyond September
Small businesses at risk of facing cash flow issues in the wake of the coronavirus pandemic will continue to have access to interest-free government loans until the end of 2020, Prime Minister Jacinda Ardern said.
The application deadline had already been extended once to 24 July but will now run throughout the year to give businesses additional lifeline as they test the waters of a post-COVID-19 economy.
The government allocated a total of $5.2bn as a safety net for businesses that employ 50 or fewer workers and are qualified for the initial wage subsidy.
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More than $1.5bn has been taken up by over 90,400 small-scale enterprises, mostly from the hospitality, retail, manufacturing, construction and transportation sectors since 12 May.
While businesses can borrow up to $100,000, the loan amount only averages around $16,700, according to Small Business Minister Stuart Nash. He is confident the stimulus package will be enough to cover the needs of any future loan applicants even with the year-end extension.
Businesses aren’t required to repay the loans within the next two years, but those who pay them back within a year won’t have to include interest. After the grace period, the interest rate is at 3%.
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Meanwhile, the government said it has no plans to extend the original wage subsidy scheme beyond September. An extension could hurt employers’ efforts to “pivot into the new COVID environment,” Ardern said.
“Continuing for too long could run the risk of being harmful to the long-term resilience of some of those businesses,” the prime minister said, citing feedback from employers.
The wage subsidy program is supporting 1.7 million workers and has cost the government $12.3bn.