Prospa gains access to NZ SME scheme

Prospa has announced that it has received access to the New Zealand government’s Business Finance Guarantee Scheme (BFGS) to assist small-to-medium enterprises (SME) respond to recover from the impacts of the coronavirus pandemic.

The BFGS loans have been designed to assist SMEs access credit for cash flow, capital assets and projects related to, responding to, or recovering from the impacts of the COVID-19 crisis, according to the New Zealand government.

Businesses can apply for the loans until 30 June 2021.

The scheme supports the provision of scheme loans to viable businesses, and encourages banks and non-bank lenders to lend where otherwise they may not by the NZ government taking up to 80 per cent of the loans’ default risk.

Borrowers would still be liable and must pay back the debt, with interest, in the usual way, the NZ government stated.

Businesses can access credit from either a participating bank or a non-bank, but not both.

If businesses borrow from a bank, that will determine the amount they can borrow and the length of the term, under one or more scheme loans up to a maximum of $5 million for five years.

Businesses borrowing from a bank must have annual revenue of $200 million or less in the most recently completed financial year.

On the other hand, for businesses who borrow from a non-bank, they are eligible for a maximum of $3 million for five years. They must have annual revenue of $50 million or less in the most recently completed financial year.

Banks on the scheme panel include ANZ, ASB Bank (owned by the Commonwealth Bank of Australia), Bank of New Zealand, Bank of China, Heartland Bank, Kiwibank, TSB and Westpac, while non-bank Nelson Building Society is also on the panel.

Prospa has received a limit of NZ$10.0 million ($9.2 million) of guarantee under the BFGS, which will cover any losses on eligible loans approved by the lender before 30 June 2021, it said in a statement to the ASX.

Prospa welcomed its addition to the New Zealand scheme, and added that it demonstrated the “important role” of fintech lenders in increasing the growth of capital to small businesses.

Commenting on the addition of the lender to the scheme, Prospa NZ general manager Adrienne Church said: “Our inclusion in the BFGS will empower us to support even more SMEs as they look to hire new employees, upgrade equipment, roll out new products and services, and invest in their future.

“The government’s decision to extend access to the scheme to fintech lenders like Prospa reinforces the important and growing role we are playing in improving the flow of capital to small businesses across New Zealand.”

Ms Church cited a recent study commissioned by Prospa and conducted by YouGov, which showed that 57 per cent of small-business owners in New Zealand believe it is becoming increasingly difficult to access funding from banks and traditional owners.

The study of over 200 small-business owners in New Zealand with less than 50 employees also revealed that of those small-business owners who have attempted to access funding, 55 per cent have missed opportunities to grow their business because they could not access funding when required.

Ms Church said: “Our recent research shows that there is considerable pent-up demand, with many small businesses finding it difficult, cumbersome and slow to access funding through traditional banks.

“Prospa has always focused on small business, and with our deep sector insights and data-driven technology platform, we are well positioned to deliver this crucial funding under the scheme. We look forward to doing our part to support New Zealand’s continued economic recovery.”

[Related: APRA confirms treatment of SME loan schemes]

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.