The Clock is Ticking: Your Small Business Cashflow Loan Repayment Guide for 2025

Remember when the world seemed to pause in 2020? As we sit here in 2024, it’s remarkable to think that five years have passed since COVID-19 first disrupted our lives and businesses. For many New Zealand business owners, those government-backed Small Business Cashflow (SBC) loans were a lifeline during those uncertain times. Now, however, there’s an important date approaching that you can’t afford to miss.

Most SBC loans are reaching their five-year maturity date in 2025, and the consequences of missing this deadline could be costly for your business. Let’s walk through everything you need to know to stay ahead of your repayment obligations.

Understanding Your Current Position

The first step in managing any debt is knowing exactly where you stand. Think of it like checking your bank balance before making a major purchase – you wouldn’t want any surprises.

Check Your Small Business Cashflow Loan Details Through myIR

Your myIR account holds all the crucial information about your SBC loan. Here’s what you should do immediately:

• Log into your myIR account to view your outstanding balance
• Locate your final repayment date – this is the deadline you absolutely cannot miss
• Review your payment history to understand how much progress you’ve made

Many business owners I’ve spoken with have been surprised by their outstanding balances. One local café owner recently discovered they owed more than expected because they hadn’t been making regular payments throughout the loan term.

Taking Action Before It’s Too Late

Making Additional Payments

If you have the financial capacity, making extra payments now is your best strategy. Here’s why this approach makes sense:

• Avoid the 13.88% default interest rate that kicks in after your loan term expires
• Reduce financial stress by tackling the debt proactively
• Maintain a positive relationship with IRD

When making payments through myIR, ensure you specifically select your SBC loan as the debt you’re paying. This might seem obvious, but incorrect allocation of payments is more common than you’d think.

Setting Up a Repayment Plan

Can’t pay the full amount by your due date? Don’t panic – you have options. Setting up a repayment plan with IRD can significantly reduce your financial burden.

Benefits of a repayment plan:

• Interest rate drops to just 3% (compared to 13.88% default rate)
• Structured payments that fit your cash flow
• Protection from immediate legal action

To establish a repayment plan, you can either send a message through myIR or call IRD directly. The sooner you initiate this conversation, the more options you’ll have available.

If You Already Have a Small Business Cashflow Loan Repayment Plan

Having a repayment plan is excellent, but only if you’re keeping up with it. Life happens, and sometimes payments get missed or delayed. If you’ve fallen behind, now is the perfect time to get back on track.

Staying Current with Your Plan

Consider these strategies to maintain your repayment schedule:

• Set up automatic payments to ensure consistency
• Make larger payments when possible to reduce the principal faster
• Review your plan regularly to ensure it still suits your financial situation

Managing Multiple Repayment Plans

Some businesses have multiple arrangements with IRD. If this applies to you, pay special attention to the ‘Media Number’ – your unique repayment plan identifier found at the top of IRD correspondence. Using this number ensures your payments are allocated correctly.

The Consequences of Inaction

Ignoring your SBC loan repayment won’t make it disappear. In fact, the consequences become increasingly severe over time. Here’s what happens if you do nothing:

The 20-Day Grace Period

After your final repayment date passes, you have exactly 20 working days before your loan officially defaults. This brief window is your last opportunity to avoid the harshest penalties.

Small Business Cashflow Loan Default Consequences

Once your loan defaults, IRD has several enforcement options:

• Immediate demand for full payment of the outstanding balance
• Default interest of 13.88% applied to your debt
• Legal action which could include court proceedings and additional costs

I’ve seen businesses struggle for years under the weight of default interest rates. What started as manageable debt can quickly become overwhelming when nearly 14% annual interest is added to the balance.

Planning Your Next Steps

The key to managing your SBC loan successfully is taking action now, not waiting until the last minute. Consider your business’s current financial position and choose the strategy that works best for you.

Questions to Ask Yourself

• Do I have the funds to pay off my loan completely?
• If not, what monthly payment can I realistically afford?
• Have I explored all available options for raising the necessary funds?

Professional Support

Sometimes, the best investment you can make is seeking professional advice. Whether it’s from your accountant, financial advisor, or business mentor, getting expert guidance can help you navigate this situation more effectively.

Moving Forward with Confidence

The approaching SBC loan deadline doesn’t have to be a source of stress. By understanding your options and taking proactive steps, you can manage this obligation successfully while protecting your business’s financial future.

Remember, IRD wants to work with you to find a solution. They introduced these loans to help businesses survive the pandemic, and they understand that repayment might be challenging for some. The key is communication and action – don’t wait until it’s too late to address your situation.

Your business weathered the storm of COVID-19 and the uncertainties that followed. Managing your SBC loan repayment is just another challenge you can overcome with the right approach and timely action.

Contact us at Business Like NZ Chartered Accountants, Auckland, if you require any more information about the Small Business Cashflow Loan scheme.