Latest News

Survive to Thrive Project | Market Insights | Are Banks Lending to Exporters?


Export orders dried up? Is bank funding an option to support liquidity?

It is clear that all businesses in New Zealand, including exporters, are being heavily impacted by C-19. Liquidity is the most pressing issue facing business currently, and while the Banks are notoriously reluctant to assist with cashflow lending usually, there are promising indications of support with the Government and financial institutions introducing significant mitigations against the economic impacts to business organisations.


WHAT IS BEING SAID?

The Ministry for Primary Industries (MPI) made a statement saying that they have been ‘working hard to keep exports going while reducing the chances of the coronavirus spreading’. Major changes they have made relate to exports of wine and plant-related products; for example to minimise the delays that have come with C-19. More information can be found on their website. (Sourced MPI Web)

The Reserve Bank Governor, Adrian Orr, placed importance on businesses utilising government tools like the Ministry of Health‘s pandemic planning platform. Orr states, ‘You want to just walk your business through what would we be doing now under the different types of assumptions, so don’t try and forecast – just assume you’re in those different scenarios – what’s happening and how are you managing through this’. Businesses are being urged to hold steady in the meantime and not lay off staff or sell off assets. (Source Radio NZ)

Lawyers around the country advise that proactive communication with banks is crucial. Parryfield Lawyers website advises: talk early with your funder and ensure you know what the position is in relation to any loans you have. (Source Parryfield Website)

Advice from Canterbury Angels, the Canterbury region’s angel investments network;

  • Cash needs to be reserved now.
  • Re-examine demand assumptions that drive your revenue lines (not just your customers but your customer’s customers), and all expense assumptions.
  • Speak to your current funders ASAP, they may be able to see you through this period of uncertainty.
  • With things changing daily we understand it is hard to be prepared in this situation, however, by being informed of your position you will put yourself in the best place possible to talk to funders, advisors and banks.

NZTE Chief Executive, Peter Crisp, acknowledged, ‘it is important to note that there remains no formal restriction on market access for goods exports and imports as a result of the outbreak. So, there is a way through this.


WHAT IS BEING DONE?

NZTE deployed an additional $4 million through the Export Business Continuity service two weeks ago for established exporting businesses impacted by C-19. It is utilising the Regional Business Partner network to provide additional on-the-ground business advisors, workshops tailored to specific business needs, and access to a national business mentoring service.

The service will provide exporters with funding for one-on-one professional services to help them manage the impacts of C-19 on their business; including business continuity planning, scenario planning, business remodelling, supply chain readjustment etc.

The Government released, pre-lockdown, the business export support package that included a wage subsidy scheme, leave and self-isolation support and business cash flow and tax measures.

The Reserve Bank of New Zealand (RBNZ) has announced it will be buying up to NZ$30 billion worth of government bonds, following other central banks’ moves to offset the impact of the coronavirus; a form of quantitive easing that will allow the government to spend the money required to shore up the economy during the crisis.

The Government is working with Retail Banks to support New Zealand businesses via the Government Business Finance Guarantee Scheme. This scheme is designed to assist eligible New Zealand based businesses with an annual turnover of $250,000 to $80 million deal with the disruption caused by C-19. Eligible businesses will be able to apply for liquidity or bridging finance up to $500,000, borrowed for a maximum of 3 years.


What Is Actually Possible with the Banks?

ASB

For customers with term deposits, seeking greater access to new credit, the following has been introduced:

  • Access to emergency funds via a 180‐day temporary overdraft facility of up to $200,000
  • Access to business working capital of up to $200,000
  • Early access to term investment funds in cases of hardship for customers that are eligible.

For customers seeking relief from fixed financial commitments, interest costs and fees:

  • Defer loan payments for up to 6 months (interest will still be added to the loan)
  • The ability to restructure to interest only loans for 6 months.
  • The ability to extend terms to reduce your repayment amounts.
  • No establishment fees when establishing or re-documenting a home or business loan. Early Repayment Adjustment fees still apply.
  • Refund default interest and any fees on accounts over their limit for 6 months.
  • Line fee waivers on Commercial Credit Facility, Commercial Flexible Finance Facility and Business Overdraft for 6 months

Westpac

Business Support Loan Key features and requirements:

  • The maximum loan limit of NZ$500,000 applies to an individual business, or a collective group of businesses where ownership is largely common and is considered a single business.
  • The scheme will initially apply to approved loans made until 30 September 2020, with a maximum term of 3 years, and is for new lending only.
  • If they can offer alternative finance on normal commercial terms, they will do so.

C-19 has meant that exporting businesses are faced with many uncertain paths to navigate. Some comfort is that the Banks, with the support from Government, are making it easier to access their normally highly restrictive cashflow lending options, which can give these businesses time to navigate the best path through by providing some of the liquidity support they need.

Two aspects are clear…

  1. Exporters should be looking at every possible option for cashflow support; reducing costs so don’t you burn cash, working with customers on beneficial payment terms, and taking advantage of direct government support.
  2. When going to banks for funding, preparation is still key. You will need to provide as much certainty as possible with clear supporting information and a clear narrative on your business; i.e. this is what has happened and this is what we are doing to get through out the other side. This means you will need to get certainty at a granular level on your customers and revenue. Build this understanding into well reasoned assumptions to get certainty into your cashflow forecast. Then use this to help drive certainty on your liquidity support from your bank (and also from your other stakeholders like your Shareholders, Landlord, key suppliers).

If any of these aspects above are whirling in your head, contact us to work through how we can help to get clarity where needed – with the time we have now to understand and plan in the best way – contact us using the button below, or email directly at christopher.boys@katabolt.com


Link to sources

Ministry for Primary Industries (MPI) – https://www.mpi.govt.nz/protection-and-response/coronavirus/exporting-during-the-covid-19-emergency/

NZTE – https://www.nzte.govt.nz/about/news/news-and-features/new-zealand-trade-and-enterprise-bolsters-support-for-businesses-impacted-by-covid19

Parryfield Lawyers – https://www.parryfield.com/companies-directors-and-covid-19-what-should-you-be-doing-to-respond/

Canterbury Angels – https://canterburyangels.nz/latest/

ASB help for businesses – https://www.asb.co.nz/page/covid-19.html

Westpac – https://www.westpac.co.nz/who-we-are/covid-19/help-for-businesses/


« Return to Blog
Are you ready to fast track your export success?

Are you ready to fast track your export success?

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!