Stills of closed fish and chip stores during COVID-19 lockdown Photo: RNZ / Nate McKinnon
Crunch time is looming for people who borrowed money through the small business cash-flow loan scheme (SBC), launched during the pandemic.
The loans were made available in May 2020 for small businesses affected by Covid-19.
Businesses were offered up to $20,000 plus $1800 per full-time employee.
More than 129,000 businesses took out loans worth $2.4 billion. The average loan amount was $17,000.
Borrowers had five years to repay the loan and many would reach that limit from June, Inland Revenue (IR) said. There were no repayments due for the first two years, and after that there was interest of 3 percent charged.
From that point, default interest would be charged, at a rate of 10.88 percent for use-of-money interest plus the 3 percent interest rate.
There is still $953 million owing through the scheme and 10,000 loans are already in default, owing just over $161 million.
IR said a high proportion of the borrowers who used the scheme were sole traders, or small businesses with two to five staff.
Some businesses had previously said the pressure of needing to pay back the Covid-19 support through the subsequent economic downturn was tough.
One, Shaleah Lawrence, of Earthwoven, in 2023 said that she was struggling to meet repayments in a high inflation environment.
"There was a lot of help in Covid but now inflation is higher than ever, we're having to pay these loans back and the money is not there," she said at the time.
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