There are three payments currently available from Work and Income to support employers affected by COVID-19; the Wage Subsidy Extension, the Leave Support Scheme and the new Resurgence Wage Subsidy. The Small Business Cash Flow (Loan) Scheme has been extended until 31 December 2020 and changes have been made to the Business Finance Guarantee Scheme to simplify and expand it. Among other support measures available, the time for commercial landlords to cancel leases has been extended from 10 working days to 30 working days, the timeframe before lenders may take enforcement action after issuing a PLA notice in relation to mortgaged land extended from 20 to 40 working days and in relation to mortgaged goods extended from 10 to 30 working days.
Is the Resurgence Wage Subsidy right for you?
In our previous Bean Blogs, we have written extensively about many of the support measures available to SMEs, however the new Resurgence Wage Subsidy needs some attention.
The return of COVID-19 in the community prompted the introduction of the Resurgence Wage Subsidy which is available for a 2 week period for businesses who have had or expect to have a revenue drop of at least 40% because of COVID-19 for a continuous 14 day period between 12 August to 10 September compared to a similar period last year. As per the other subsidies that were made available due to COVID-19, there is a strict criteria for employers to be eligible for the Resurgence Wage Subsidy, available from Work & Income.
Employers need to be aware that this subsidy is only available if you are not already getting the Wage Subsidy, Wage Subsidy Extension or the Leave Support Scheme for your employee/employees, ie. You can’t receive more than one COVID-19 payment from Work & Income for the same employee at the same time.
Time is running out to apply for the Resurgence Wage Subsidy, with applications only open until 11.59 pm on the 3rd of September 2020.
Talk to us if you think this might be something your business could be eligible for. We can assist with any questions you may have and help reassess your business direction in response to COVID-19.
How can you make the Business Finance Guarantee Scheme work for you?
The Business Finance Guarantee Scheme works to encourage banks to lend where otherwise they may not by the Government assuming the default risk of up to 80% of loan values. The Government’s portion of the risk is guaranteed without a personal guarantee. Lending decisions are made by banks and the Scheme is open for applications until 31 December 2020. Borrowers are still liable and must pay back the debt, with interest, following usual process.
Changes to the scheme mean that loans can now be used for reasons relating to operating cash flow and capital purchases and projects in response to, or recovery from, COVID-19. Further to this the scheme is now available to businesses with revenue up to $200 million, the lending limit is now $5 million (up from $500k) with a term of five years and you can restructure up to 20% of your existing debt.
What this means is that if you meet all required criteria to take out a loan under this scheme, should for example, you need to modify your business premises in order to operate at the different alert levels, you can use the credit to do so.
While this Scheme and the changes to it are a welcome relief for SMEs, we want to remind you that any loans taken out under this scheme need to be repaid and the financial implications of this on your business should be considered and analysed before any such decisions are made. We can help you with cash flow projections and scenario analysis so that you are making well-informed business decisions that will enable your business to survive and thrive in the long-term.