Interest on the SBCS loans issued by the IRD from 2020 onwards begins to accrue at a rate of 3% after 2 years, and for many businesses who applied during the first lockdown in 2020, this 2 year date will be coming up in the next few months.

To help reduce the impacts of Covid-19, the IRD implemented the Small Business Cashflow Scheme (SBCS). These were small loans to help businesses stay afloat during the testing times of lockdown and financial uncertainty. Many were issued in close proximity to the first lockdown in 2020, so for many business that were granted a loan then, interest may be about to kick in. The annual interest rate is 3% and this will begin to apply after the first 2 years of the loan. 

According to the IRD website, the following general rules apply:

  • Loan recipients have 5 years (60 months) to pay off their loan
  • If the loan is not repaid with 2 years (24 months), then interest will start to apply at a 3% rate.
  • If the loan has not been fully repaid within the 2 years then interest will apply to the entire loan
  • Payments within the first 2 years aren’t compulsory, and loan recipients are able to make repayments at any period. But once the 2 year threshold has ticked over payments will become compulsory and they will include interest.
  • You can also request for any tax refunds to be put towards reducing the loan amount – you just need to contact the IRD through your myIR portal
  • You can read about methods of payment here

As Covid struck at the start of 2020, many business may have the 2 year date coming up in the next few months. If you applied for a SBCS loan, we highly recommend you review your loan amount and how much you’ve repaid early before the 2 year date creeps up. If possible hopefully you can repay the loans before interest begins to accrue, but understandably this won’t be possible for many businesses. This just means you need to be aware of the fact that mandatory payments (with 3% interest) will begin to kick in soon and budget accordingly. If you want assistance in reviewing/planning your loan payments or any questions in general – feel free to get in touch. We’re here to help.