Business Finance Guarantee Scheme Interim Evaluation

An independent, interim evaluation of the Government’s
Business Finance Guarantee Scheme (BFGS) has been undertaken
by Business and Economic Research Limited (BERL).

The
BFGS, which closed to new lending on 30 June 2021, supported
the provision of loans to viable businesses that needed
credit for cashflow, capital assets and projects related to,
responding to, or recovering from the impacts of COVID-19.
It encouraged participating lenders to lend where otherwise
they may not have, through the Government taking up to 80
per cent of the loss should the loan default.

The
Treasury-commissioned interim evaluation reviewed the
effectiveness and ongoing operations of the
scheme.

“There is a lot of good feedback in the report
that will be useful to inform any policy decisions that may
be required to support potential widespread business
disruption in the future,” says Peter Rowe, Acting Head of
New Zealand Export Credit.

“That feedback includes
that the Government backing provided confidence to the
market in a time of global uncertainty, and the reduced cost
of funding to banks and restructuring of debt for businesses
allowed many businesses to survive through the
pandemic.

“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.”

The
report notes that the BFGS ‘instantly played a critical
role in financing businesses operating in industries hit
hard by COVID-19’ including retail trade, accommodation
and food services, and construction industries.

“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.

“We plan to share this report with
counterparts in other countries who implemented similar
programs to support their domestic economies.”

The
Business Finance Guarantee Scheme Interim Evaluation is
available here: Proactive
Release of the Business Finance Guarantee Scheme (BFGS)
Interim
Evaluation.

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