More lending in the scheme was seen after significant adjustments to requirements. (file picture) Photo: mrdoomits/123RF
The government's business support loan scheme during Covid-19 restrictions has scope for improvement, according to an interim evaluation.
The Treasury commissioned the evaluation of the Business Finance Guarantee Scheme and it was carried out by Business and Economic Research Limited (BERL).
It found the general consensus was the scheme achieved its objective of providing credit to cushion the impact of Covid-19 on small-to-medium enterprises.
But it said the success was limited at the start due to tight restrictions on accessibility and criteria which banks were required to use to assess loan applications.
More lending in the scheme was seen after significant adjustments to requirements.
The evaluation also found that for many firms, taking on more debt was not an ideal prospect.
The report said the initial uptake was below expectations and changes made to the programme should have been included from the outset - in particular, the inclusion of non-bank lenders.
"We also learned that we need to better engage sooner with non-deposit taking lenders (non-bank lenders), and that the legalistic wording of the scheme in our communication had been off-putting to some," Treasury acting head of New Zealand export credit Peter Rowe said.
"BERL noted that for many firms, the prospect of taking on more debt was not attractive, but being able to refinance some of their existing debt allowed them to survive through the pandemic," Rowe said.
The evaluation also found the process to establish the scheme could have been improved.
However, it said the government backing provided confidence to the market at a time of uncertainty.
"The reduced cost of funding to banks and restructuring of debt for businesses allowed many businesses to survive through the pandemic," Rowe said.
