Direct small business loan scheme is now working

26 comments on “Direct small business loan scheme is now working ”

• Comments are now closed

1. ianmac 1

   27 May 2020 at 1:23 pm

   Perhaps you have already answered Muller's question for today:

   "TODD MULLER to the Prime Minister: When she said yesterday that the Government was “using the tax system to get cashflow to small business”, what did she mean by that?"
   • Cinny 1.1

     27 May 2020 at 7:59 pm

     Hehehe … todd seems unaware that the opposition does not, as a rule, ask the government patsy questions.
2. patricia 2

   27 May 2020 at 1:38 pm

   Perhaps he thought they should go through the Bank of China?
3. Brutus Iscariot 3

   27 May 2020 at 2:16 pm

   Pretty telling that banks won't lend at all to these people, even with government taking 80% of the risk. Shows there isn't a hope in hell of seeing a penny back. A lot of the businesses will grab all the bonuses, owners extract what they can over the next few months while running the business to zero, then fold (extinguishing the debt). Can always recommence operations under another entity. Dumbarse taxpayer ends up saddled with the bill.
   • Descendant Of Smith 3.1

     27 May 2020 at 2:33 pm

     That's the trouble with those who see everyone as dishonest – you'd make policy and decisions based on lack of trust. Let's face it – managerial style, performance measurement, bonus systems, health ad safety, propaganda in the guise of training, welfare systems are all based on the principle of lack of trust.

     After all if you are a dishonest shit who would rip someone off (profit to a large extent is dishonest much of the time) then you would see everyone else through the same eyes.

     The government clearly asked us to trust them, in return they are trusting us. It's a two way street.
     • I Feel Love 3.1.1

       27 May 2020 at 2:47 pm

       Right on DOS!
       • patricia 3.1.1.1

         27 May 2020 at 4:42 pm

         I agree. No other Government in my 78 years has said, "We have your backs NZ"
   • lprent 3.2

     27 May 2020 at 3:28 pm

     Pretty telling that banks won’t lend at all to these people, even with government taking 80% of the risk.

     Have you ever gone for a loan from the bank with a small business or as a sole trader? Basically anyone with a brain after trying it once will put into the way too hard basket. They spend an age asking for information to assess your viability and almost invariably turn you down.

     If you look at how any small business starts out, they usually mortgage assets, get credit cards, or borrow off friends and family to get started. Then they’re often running for years on the smell of an oily rag. It is only after they get viable (ie roughly when the owners are making minimum wage) that the banks are interested in them – and then usually it is only in the form of an overdraft.

     Dumbarse taxpayer ends up saddled with the bill.

     Which really just shows how much of a totally ignorant dumbarse you are. Small businesses are significiant taxpayers as well, both directly and indirectly.

     Ones in this range of employees directly account for something like 25-35% of all government collected tax revenues. They constitute the majority of company taxes, and a very high proportion of the value add taxes in GST. The variation depends pretty much on the state of the domestic economy, and how many are failing vs how many are starting.

     It gets higher when you look at individuals tax because they pay a large number of employees – who then get taxed.

     The problem for the government and taxpayers is that if too many SME business fail all at the same time in something like a global pandemic, then employment drops precipitously as well. The remaining taxpayers then wind up paying for ‘don’t starve’ support for citizens for years while the businesses re-establish themselves.

     The attitude you’re displaying is one that I characterize as being one of short-term punitive stupidity. That same kind as is evidenced in our social welfare systems (outside of superannuation) where the direct cost of trying to stop people ripping the system off with vindictive rules designed for simple minded nay-saying bigots like you is probably in the order of 3-4x the saved costs. The admin costs of superannuation are about 2-3% of the paid out benefits. The cost of admin things like employment benefits are about 20-30% of the paid out benefits.

     Small-minded dimwits like you who are too stupid to understand basic operational systems are the real cost to taxpayers…
     • Brutus Iscariot 3.2.1

       27 May 2020 at 6:58 pm

       270m has gone to sole traders. Those are unlikely to be capital intensive businesses. Very easy to just dismantle and set up again once you've milked the system.

       Remember the leaky building fiasco? Noone could be pursued because the builders all just wound up their companies and started new ones.
       • KJT 3.2.1.1

         27 May 2020 at 7:14 pm

         Dishonest people assume everyone else are dishonest.

         Who woulda thunk it!

         Explains the way National runs welfare.

         And, it was National’s privatised building inspectors, who left councils, and ratepayers, with the costs.
       • new view 3.2.1.2

         27 May 2020 at 7:21 pm

         BI Wow what a judgmental fuck you seem to be . So we won’t offer the help because a few arsehole businesses abuse the system. Just like some arsehole would be beneficiaries will abuse the system. Grow up. There’s been a real problem here and the loan setup through IRD seems to be working. Great. Good tweek by this Government.
       • Cinny 3.2.1.3

         27 May 2020 at 8:04 pm

         brutus, you are aware of the different structures of a company v's a sole trader and the resulting financial obligations should the business go bust?

         Because reading your comment it appears you have no idea. JS
       • RedBaronCV 3.2.1.4

         27 May 2020 at 8:05 pm

         If they are sole traders they may not be trading under a company structure – even though they probably should be. So any walk away is not so easy even if they know how to do this.

         However, as Lprent says they are likely to have credit card and mortgage borrowings and it is highly likely if they are able to, that they will pay this higher rate interest debt down (credit cards are pretty high in the current market) which will help flatten their outgoings while their trading is down and keep them viable.
         • KJT 3.2.1.4.1

           27 May 2020 at 9:52 pm

           A small business, or sole trader, has to sign personal guarantees, to get any sort of trade credit. It doesn't make any difference if they are a limited company, or not.

           Unless you have an excess of capital to start with. No credit, no supplies for your business.

           If you want to walk away the only option is personal bankruptcy.

           The option that used to be available to cowboys. Putting everything in the wife's name, and scarpering to Australia, is not a goer, at present.
           • RedBaronCV 3.2.1.4.1.1

             27 May 2020 at 10:05 pm

             A company structure depending on the exact type – has a better chance of walking away from the IRD. Other creditors as you say are usually a lot harder to move on from.
       • Tricledrown 3.2.1.5

         27 May 2020 at 10:55 pm

         they have to follow the rules of the loan making them personally liable.
       • lprent 3.2.1.6

         28 May 2020 at 2:08 pm

         Bankrupting sole traders is what the IRD does… They seldom forget taxes owed.

         Remember the leaky building fiasco? Noone could be pursued because the builders all just wound up their companies and started new ones.

         Vividly – my apartment block was one. We extracted our money from the council as they inspected the build.

         Which is why the re-regulation made the council inspectors have to sign off. The role of company directors was made way more legally responsible as well, and the liquidator roles was markedly increased as well in their powers to grab assets to pay creditors.

         Basically, since we managed to get past the dickhead deregulations that National/Act put in to allow avoidance of responsibility, there are way more ways to hold irresponsible business people's feet to the fire. That is why they complain about it all of the time.

         The equivalent here is that the IRD can and do chase defaulters for decades. They make it their trademark for doing it. They have the powers to do it that banks can barely dream of getting. No-one in business ever wants to get the IRD chasing them. It builds a high trust relationship – you can trust the IRD to be fucking irritating if they think you're trying to rip them off.
     • Herodotus 3.2.2

       27 May 2020 at 8:23 pm

       "They constitute the majority of company taxes, and a very high proportion of the value add taxes in GST."- Not sure I can agree with the GST comment – The GST registered company that is at the end of the supply chain in the sales process to the end user (not GST registered purchaser) is the collector on behalf of the government and passes on the net GST to the government. They don't constitute (as I read your comment) a high proportion of the GST.

       But using the IRD as the distributer is as I see it the most efficient means of doing something like this 🙂
       • lprent 3.2.2.1

         28 May 2020 at 1:40 pm

         I'd agree with the general statement (they are the collector).

         However I was specifically looking at the value add part. The vast majority of the SMEs are at the very end of the distribution chain, and typically have one of the largest markups.

         GST is a value add tax, and the distributors prior to the 'retail' are typically larger organisations with typically smaller margins. And the margins at the end of the chain are typically percentages on top of all of the markups prior. Not only on the goods themselves but also effectively on all of their costs (power etc).

         The best example to look at this is to look at the classic SME – dairies or superettes. The price charged is somewhat larger than you'll find the same item at a large urban supermarket. Customers pay it for the convenience. If the diary wasn't there, then customers either wouldn't get it (say an ice-cream) or maybe start buying the same thing from a supermarket (lunch?) – with a resulting drop in retail price and therefore GST collected by the government.

         The same applies to the way that I buy computer gear. I can and sometimes do, buy direct from manufacturers. But I’ll buy from a pbtech store because they will have it in stock – and I pay a premium on it because it is already landed in NZ. But I’ve been known to buy from the little computer store up the road at a much larger markup and GST because I need the CPU heat transfer now (when the Standard’s CPU is without its water cooler).

         Value add often means just being present to extract extra money from the customer for timeliness and convenience – it is a significiant part of the tax take for exactly that reason.
   • Tricledrown 3.3

     27 May 2020 at 11:03 pm

     Those who misappropriate money could find themselves in prison under the terms of the loans.The audit department are going to go through every loan to make sure the rules are being followed.
   • Tricledrown 3.4

     27 May 2020 at 11:15 pm

     According to a senior lender in one of the big 4 banks they can't get loans out the door fast enough.The govt gave the Banks $60 billion they don't make money by not lending.
   • Dave 3.5

     4 June 2020 at 3:21 am

     Hello everyone

     I am thankful for this loan and will pay it back.

     It's provided help when needed.

     Dave
4. Jackel 4

   28 May 2020 at 12:04 am

   I'd give the government a better mark than perhaps they with typical kiwi modesty give themselves. Day to day life is returning to normal, demand is returning to the economy, the virus is eliminated though still a threat and adequate support systems are in place. But we must remain vigilant particularly with measures of border control. Well done.
   • Graeme 4.1

     28 May 2020 at 7:18 am

     Looking around Queenstown you'd thing we were back to normal, normal traffic, including the commuter jams at 8 and 5.

     And tourism is slowly coming back to life, a few flights going into Milford and some of the hotels open. But generally the tourist side is dead. But it's normally the depths of the off season right now, we'll see what happens this weekend, and when the skifields open, but not much sign of that yet, mountains are still very green.

     I've seen it a lot quieter here at this time of year in 'normal' times.
5. greywarshark 5

   28 May 2020 at 12:40 pm

   Grameen Bank* – small bank loans to micro-business would be right to adopt now.

   The big boys and girls in government have to learn to think in mill/billions. The individual working 40 hours a week is on borrowed time, a full working week on a living wage can't last long in this disruptive financial world. And even working at 40 hours, they may receive less than one of the urbane high-culture professionals receives an hour when on some special contract.

   Small things amuse small minds it is said. So small loans will please small people and will make great effect in their lives and their enterprises which have taken the place of regular jobs at living wages. Small loans to hard workers would enable some social mobility which seems to be a forgotten plank in the political discourse these days. We've got it, you haven't, suck it up being the usually unspoken attitude.

   *Grameen Bank (Bengali: গ্রামীণ বাংক) is a microfinance organisation and community development bank founded in Bangladesh. It makes small loans (known as microcredit or "grameencredit") to the impoverished without requiring collateral. https://en.wikipedia.org/wiki/Grameen_Bank
6. Frank the Tank 6

   28 May 2020 at 3:35 pm

   You'll only know whether the loan is working by mid July when the cash flow hole for businesses will be peaking (I can explain this in need if you want). Till that point all you have is an uptake with the prognosis unknown. Kinda like using hydroxychloroquine to treat Covid-19.

   However based off what I know I think you'll find this will be an epic fail. There is a reason why bank's didn't want to take up these loans (including Kiwibank)…….

• Comments are now closed

• Log in
• Donate
• Contribute post

• Articles RSS