The Financial Services Federation (FSF) has announced that the government’s Business Finance Guarantee Scheme (BFGS) has been extended to non-bank lenders - a move it said hugely benefits the SMEs that can’t access funding from the main banks.
The BFGS was designed to help New Zealand’s small to medium enterprises access funding for cashflow, capital assets, and to help aid their COVID-19 recovery, with the government taking on 80% of each loan’s default risk.
The scheme is open for the next three months, and FSF executive director Lyn McMorran said she is “delighted” that the non-bank sector has finally been included.
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“We’ve been working with the government since the BFGS was first announced, where the idea was to stimulate the economy, help businesses get through COVID-19 and invest to grow,” McMorran said.
“But it was originally only aimed at the banks, and we’ve always maintained that while the banks are good at housing lending and corporate banking, they’ve not traditionally been so friendly towards SMEs.”
“They tend to want a lot of security, and that’s one of the reasons why the non-banks exist,” she explained.
“They understand the sector a bit better, they’re closer to their customers and they are prepared to lend against the asset that’s being purchased rather than expecting a family home to be tied up in the deal.”
Four FSF members - UDC Finance, Prospa NZ, FlexiGroup and Speirs Finance - are now part of the BFGS.
McMorran said that this move will be a huge boost to small businesses, and is a great step towards further collaboration between the government and a sector that it has had little to do with in the past.
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“I’ve always said that if the government wanted to help small businesses, they should get small business lenders involved in the scheme,” McMorran said.
“It’s taken a while, and, to be fair, the government hadn’t had a lot to do with the non-banks sector since the GFC - and that didn’t leave them with the best impression. But we were working to build a relationship with a sector of government that we don’t normally have a lot to do with, so we’re just delighted that it’s finally gotten over the line.
“We hope lenders make the most of it, and also that the small businesses make the most of the opportunity to have support from the non-bank sector.”