Frequently Asked Questions
About the Business Finance Guarantee Scheme
The NZ Government’s Business Finance Guarantee Scheme (Scheme) helps eligible small businesses access credit for the purpose of responding to, positioning to recover from, or recovering from, the impacts of COVID-19 – in this Scheme the Government will cover up to 80% of any losses incurred on this product. The Scheme is available for eligible loans entered into by 30 June 2021.
Prospa is an approved lender in the Scheme which provides Prospa (not borrowers) with a Government-backed guarantee to mitigate our risk if a customer is unable to repay our loan. The Government has not provided Prospa with funding, we are still using our own funding when lending to customers.
Prospa will follow its standard credit assessment process and like any loan, businesses are required to repay a loan taken out under the Scheme. Government-defined eligibility criteria also applies. Whilst the Government is covering up to 80% of losses, the current economic conditions contribute to a riskier market in the small business space and Prospa still needs to lend in a responsible and sensible way. Risk and uncertainty remains high in the current environment, even with some of the risk accounted for.
Prospa is an approved lender in the Scheme, as it recognises the important role of non-bank lenders in boosting the flow of growth and funding to small businesses.
What is an “excluded activity”? In order to be eligible to apply for a loan under the Scheme, a borrower’s business must not involve any of the following excluded activities:
- the manufacture of cluster munitions;
- the manufacture or testing of nuclear explosive devices;
- the manufacture of anti-personnel mines;
- the manufacture of tobacco;
- the processing of whale meat;
- the manufacture or distribution of recreational cannabis;
- the manufacture of civilian automatic and semi-automatic firearms, magazines or parts; and
- any activity which is illegal in New Zealand.
What is an “excluded purpose”? In order to eligible to apply for a loan under the Scheme, borrowers must not apply the proceeds of the loan for any of the following excluded purposes:
- to fund dividends to be distributed outside the Borrower’s Guaranteeing Group; or
- to fund on-lending outside the Borrower’s Guaranteeing Group; or
- to fund one or more Excluded Activities; or
- to fund residential or commercial property development or investment; or
- to repay or refinance the Borrower’s existing indebtedness to the Lender.
What is a “guaranteeing group”? This refers to the borrower under a Prospa Back to Business loan and each person (if any) that has provided a personal guarantee to Prospa in relation to the borrower’s obligations.
Am I a “New Zealand-based business”? Your business will be a NZ-based business for the purposes of the Scheme if meets the following criteria, if carried on by:
- an individual or a company, the individual or the company is resident in New Zealand for the purposes of the Income Tax Act 2007; or
- a company or partnership (including a limited partnership) or trustees of a trust (in each case whether or not formed or incorporated in New Zealand), the relevant entity or body of persons:
- is or are resident in New Zealand for the purposes of the Income Tax Act 2007; or
- carry or carries on business in New Zealand through a fixed or permanent place of business in New Zealand and will file a New Zealand income tax return in respect of that business.
About the Prospa Back to Business Loan
Prospa is offering the ‘Back to Business’ loan as part of the NZ Government’s Business Finance Guarantee Scheme. It covers loans between $100,000 and $300,000 over a fixed term up to 24 months.
The Back to Business Loan has an Origination Fee which is calculated at 2.5% of the loan amount.
To qualify for a loan of this size, Prospa requires a business to have been trading for at least 3 years with an average monthly review of $100K
A business may be eligible to apply for a loan under the Scheme if it meets the eligibility criteria, including that it:
- had, in its most recently completed financial year (or, if the business has been operating for less than one full financial year, expects to have in its first full financial year) revenue of up to $200 million;
- is a New Zealand-based business and does not involve an activity that is excluded under the Scheme;
- is not a local authority, a council-controlled organisation or a council organisation for the purposes of the Local Government Act 2002; and
- requires the loan for the purpose of responding to, positioning itself to recover from, or recovering from, the impacts of COVID-19.
The following Government-defined criteria also apply:
- loans cannot be used to fund dividends to be distributed outside the borrower’s guaranteeing group, on-lending outside the borrower’s guaranteeing group, any purpose related to a Government-defined excluded activity, residential or commercial property development or investment, or to repay or refinance an existing loan with Prospa; and
- the total sum of funding supported by the Business Finance Guarantee Scheme between Prospa and the borrower, and any guarantors, must not exceed $500,000.
Borrowers will be required to certify that eligibility statements in relation to their business are correct.
Loans under the Scheme are only available to eligible new and existing approved customers for a new small business loan that is settled by 30 June 2021. Please note, the Scheme is not available to customers who wish to refinance their existing Prospa Small Business Loan.
Offer only available to businesses established and operating in New Zealand. Not all amounts, term lengths or rates will be available to all applicants. Fees, terms and conditions apply. The offer may be amended or withdrawn without notice.
A Back to Business Loan can only be used for the purpose of one or more of responding to, positioning itself to recover from, or recovering from, the impacts of COVID-19, and not for any excluded purpose or excluded activity.
Existing customers can apply for a loan under the Scheme, if they meet the eligibility criteria and noting that only new loans are eligible under the Scheme. Borrowers are not able to refinance, extend or increase their current Small Business Loan under the Scheme.
With the Prospa Back to Business Loan, no asset security will be taken however personal guarantees will be required from directors or shareholders.
By comparison, security is required to access over $100K under a Prospa Small Business Loan in the form of a charge over assets, and Prospa may register on the PPSR or register a caveat.
A personal or director’s guarantee is a promise to repay credit that is general in nature rather than specifying security over a particular asset. The person signing the guarantee is personally liable if the business borrower is unable to re-pay the debt.
A Personal Property Securities Register (PPSR) is a central, national online register operated by the New Zealand Government. It reflects security interests registered in respect of personal property (including goods or assets). The PPSR allows priority over personal property to be assigned according to the date a security interest is registered.
A caveat is a legal document lodged to provide notice of a legal claim to a property.
About the Prospa Small Business Loan
Prospa offers business loans of $5,000 to $300,000 with terms between 3 and 24 months and cash flow friendly repayments that are either daily or weekly.
You can apply for the Prospa business loan in under 10 minutes online or over the phone, receive a same day response and the funds could be in your account in 24 hours. Traditional business loans reference an interest rate per annum plus other fees and charges. The Prospa business loan is an upfront priced loan so you will know in advance the total amount payable including any interest, fees or charges. This is then broken down into either a daily or weekly repayment figure.
A Prospa business loan can be used for almost any business purpose including cash flow management, business renovations, marketing, to purchase inventory or new equipment, as general working capital and much more. The loan cannot be used for personal purposes.
You can apply for a Small Business Loan with Prospa if you;
- are a New Zealand Citizen (or Permanent Resident)
- are over 18 years, own a New Zealand business (with a valid NZBN/IRD)
- can demonstrate at least 6 months of trading
The application process is easy and fast. Simplyin 10 minutes.
For loans of $150,000 or less, all you need to have ready is:
- Identification details (valid Driver’s Licence)
- Details about your business (including trading time, ownership details & an active Business Number)
For loans over $150,000 you will also need some basic financial statements like a P&L and cashflow, so we can evaluate the health of your business and see what kind of repayments your business can manage without stress.
We can often provide a response in one hour – as long as you apply during standard business hours and allow us to use the advanced bank verification system link to instantly verify your bank information online. If you choose to upload copies of your bank statements we can provide a decision in as little as one business day.
If you apply before 4pm on a business day and your application is approved, it is possible to have money in your account the next business day.
We provide loan amounts between $5,000 and $300,000. When you make an application for a specific amount we consider a variety of factors to determine the health of your business and the level of repayments your business can support. The total amount of your loan will depend on the specific circumstances of your business.
Fees & repayments
When you apply for our business loan, we will assess the risk profile of your business and provide you with a customised offer including loan amount, term and interest rate. The Prospa business loan is an upfront priced loan so you will know in advance the total amount payable including any interest, fees or charges.
Business loan interest rates vary due to factors including the amount borrowed, what business assets the funds will be used for, the industry the business operates in, how long the business has been running, whether the business has sufficient cash ﬂow to support the loan, and the overall ‘health’ or creditworthiness of the business.
There are no hidden fees for our business loans, and you’ll know exactly how much you need to pay, and when, from day one. There’s no compounding interest and no additional fees (as long as you make your payments on time).
Prospa doesn’t charge an Application Fee. You can apply for a loan with Prospa with no upfront cost or obligation to proceed.
The Origination Fee covers the costs associated with setting up and managing the loan. You are only charged this fee if you proceed with the loan. Our Origination Fee is 2.5% of the loan amount.
You can choose to repay the entire amount of your loan early at any time.
If you decide to do this please speak to our friendly business loan specialists on 0800 005 797. They will provide you with repayment details and an early payout figure. This will be calculated as the total of the remaining principal amount and any accrued interest at the date of early payout, plus 1.5% of the remaining principal and any outstanding fees.
A different calculation applies for businesses who entered into a loan contract before 1 October 2020. If this is you, the level of discount applied to your early repayment amount will depend on how far you are into the loan term and, provided you are not in default, will be at least 25% of the remaining interest payable on your loan. Please call us on 0800 005 797 to find out more.
To help you avoid missing repayments and to fit in with your cash flow cycle we offer repayments that are either daily or weekly. These are automatically deducted from your nominated business account.
Security & privacy
Yes. We use industry recognised encryption standards to protect your personal, sensitive and financial data and we’re ISO 27001 certified for our commitment to customer security and privacy. We use an advanced bank verification system link to instantly verify your bank account information online so we can provide a fast response.
About business loans
Asset-based borrowing is when a business owner uses an asset they own to secure a loan. The asset can be either a personal asset like the family home, or a business asset like a truck or piece of equipment.
The vast majority of lenders, including the big banks, tend to secure loans against an asset. If you have trouble paying back the loan then your asset may be sold by the lender. In essence it’s a way of securing new financing by using the value of what you already have.
For loans up to $100,000 no asset security is required upfront to access the money, however we do require a personal guarantee. As long as you follow your loan obligations (as detailed in your loan contract document), asset security will never be required. For loans of over $100,000 Prospa generally takes a personal guarantee and security in the form of a charge over assets.