$426m loans approved for SMEs in first 48 hours under government cash program

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More than 25,000 small business loans under the government’s Small Business Cash Flow Loan (SBCS) program have been approved in the past 48 hours, totaling nearly $426 million.

Inland Revenue (IR) said Thursday morning that 28,000 loan applications had been submitted, with just under 25,500 approved and disbursed in the past two days.

The average amount loaned to SMEs was $16,725. The average amount requested by companies under the program was just under $18,000, he said.

Businesses can access $10,000, plus $1,800 per full-time equivalent employee. The self-employed and individual traders were able to access $11,800 under the program, which is interest-free for the first 12 months.

It continues to process applications and will do so until the June 12 closing date.

Jason Ennor, CEO of MyHR.

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Jason Ennor, CEO of MyHR.

At a press conference on Wednesday, Prime Minister Jacinda Ardern said the loans would help businesses pay fixed costs, such as rent.

But employment and HR law specialist Jason Ennor, CEO of MyHR, said companies need to think seriously about the decisions that are being made as the country moves into Covid-19 level 2, because bad decisions could make the difference between success and failure.

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“Making careful and thoughtful choices that enable businesses to quickly recover, rebuild and prepare for future growth is essential,” he said.

Companies are looking for ways to cut costs during this time, and Ennor has found that with the 800 companies he works with, there has been an 800% increase in restructurings and a 3,000% decrease in employment contracts. .

The government cash loan will help cover business expenses, but will not drive down wages, he said.

“I don’t really see the loan being particularly helpful for wage support…it’s just not enough,” he said.

The wage subsidy blocked a “significant amount of layoff activity,” he said.

But now, more and more companies are coming to him to help them restructure.

He used to work with nine companies a week on restructurings, now he works with over 200.

“It’s because of the exhaustion of the wage subsidy. If it’s extended it would help, but how long can you extend it if it’s artificially supporting businesses?”

He said he’s seen a number of companies lay off good staff based on salaries, rather than the experience staff bring to the table.

“It’s critical to retain your right people who know the business inside out and can work with you to identify and respond to opportunities quickly,” he said.

“It is these employees who will help guide the company through restructuring and steer it in the right direction with new ideas, new ways of thinking and optimism.”

Restructuring will be essential for many companies as they weather the Covid-19 economic storm, but Ennor said there are other ways to increase cash flow than laying people off.

He suggests improving efficiency and profitability by outsourcing non-essential services, or continuing to cut hours or introducing temporary pay cuts, which many companies have already started doing.

“During uncertain times, which many companies will face over the next few months and into the next year, it is essential to ensure the well-being and motivation of employees. to be transparent and to keep staff connected and engaged with the new direction and direction of the business,” he said.

“But I really feel for these companies. There are iconic brands that are disappearing.”

The Canterbury Employers’ Chamber of Commerce also found the impact on cash flow to be “profound” on businesses in the area.

A Chamber of Commerce survey found that SMEs have been hit hardest by losing customers and rising costs.

The biggest challenges for businesses in Canterbury under Covid-19 Level 3 have been cash flow, lack of customers and social distancing rules.

Chief executive Leeann Watson said while the Chamber was supporting business, more was needed.

“We have engaged with over two thousand businesses in the last two months through our Covid-19 helpline and email and 6,000 businesses in our webinars,” she said.

“The survey results reinforce what we are seeing – namely the very real need for continued targeted financial support and the need for HR as we continue to see increased needs for support for restructuring, redundancy and business resizing.”

Ardern said on Wednesday that the unemployment rate would rise as a result of the Covid-19 pandemic, but the number one priority in Thursday’s budget is jobs. Additional support is also expected to be announced for businesses.

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