"Many are now reaching their cutoff point," Inland Revenue says
Inland Revenue (IR) is chasing more than $850 million from small and medium-sized businesses as the Small Business Cashflow (SBC) Loan Scheme reaches its five-year anniversary.
More than 129,000 businesses borrowed $2.4 billion
Launched on May 12, 2020, the SBC scheme was introduced to provide emergency support to businesses affected by the COVID-19 pandemic.
More than 129,000 businesses received loans, totalling $2.4 billion, with the average loan size being $17,000, 1News and interest.co.nz reported.
“Most loans were taken out in the first few months of the scheme, with a five-year repayment period, so many are now reaching their cut off point,” IR said in a statement.
Only half have repaid in full as default risk looms
As of April 30, just 64,000 borrowers had repaid their loans in full. The remaining balance across all outstanding loans is $853 million.
From next month, IR will begin defaulting loans that remain unpaid.
“Default interest (calculated based on use of money interest of 10.88% plus standard interest rate of 3%) will be charged,” the agency said.
Over 14,000 loans already in default
Currently, around 14,300 customers are in default, with a combined debt of just over $242 million.
“IR is actively taking steps to recover these defaulted loans,” the department said.
Debt recovery campaign reclaims $10 million
Since February, IR has been contacting customers with overdue loans and tax debts. Efforts have resulted in the recovery of nearly $10 million, interest.co.nz and 1News reported.
“Since February this year we’ve tried to contact more than 1,500 customers who have defaulted loans and tax debt. As a result, we’ve recovered almost $10 million of SBC and tax debt from these customers,” the agency said.
“Almost 20% have entered into an arrangement to pay the debt; 30% had a deduction notice placed on their debt to collect it directly from their bank account and 33% have made lump sum payments.”
Businesses urged to check repayment plans
IR is reminding borrowers that repayment is required and warning of legal action and additional charges for those who fail to act.
“We are also reiterating that there are consequences, such as default interest being added to the balance and legal action, if the loan remains unpaid.”
Customers can view their loan balance and repayment status in myIR and are encouraged to use the secure channel to request changes to their plan if needed.
