Small Business Cashflow loan defaulted? What happens now

The Small Business Cashflow (SBC) scheme helped thousands of New Zealand businesses through the pandemic years. Those loans had a five-year term, and many are now reaching the end of it. For businesses that still have a balance, the end of the term isn’t a soft deadline.

What happens when an SBC loan term ends?

IRD has been clear that whatever is still owing on an SBC loan, interest included, when its term ends goes into default automatically. It treats the defaulted amount as overdue debt and may charge default interest on it (IRD).

That changes the nature of the debt. While the loan was running, you had an agreed schedule. Once it defaults, it sits in IRD’s collection process alongside any GST, PAYE or income tax you might owe. IRD’s annual report put SBC loan debt at $383.6 million at 30 June 2025, which gives a sense of how many businesses are in this position (IRD Annual Report 2025).

Has IRD contacted borrowers?

IRD said it would contact borrowers whose loans expire before 30 June 2026, in late November 2025 and February 2026, and that it wanted to talk with those who are behind or have defaulted about paying the debt. If your term has ended and you haven’t heard anything, check myIR. Notices increasingly arrive there rather than by post, and they’re easy to miss. Our page on IRD overdue notices explains why that matters.

What could IRD do if the balance isn’t dealt with?

The defaulted balance is overdue debt, so in principle the same escalation applies as for tax: reminders and calls, possibly a visit, then stronger steps such as deduction notices to your bank. For companies with other tax debt, a large combined balance also brings the 2026 credit-reporting rules into view, since those focus on GST, PAYE and income tax.

Our IRD escalation timeline sets out how the steps usually unfold.

SBC balance plus other IRD debt? One loan can clear both. Ask us whether it fits, with no credit check to enquire.

What are your options?

Option	What’s involved	Suits
Pay in full	Clear the balance from cash or the sale of an asset	Businesses with the funds available
Negotiate with IRD	Contact IRD and propose a repayment plan	Smaller balances and steady cash flow
Instalment arrangement	A formal agreed plan in myIR	Debts you can clear within a reasonable term
Business loan	Refinance the SBC balance, often with other tax debt	Viable businesses with property or steady turnover

If you also owe GST or PAYE, it usually makes sense to look at everything together. Clearing one debt while another keeps growing doesn’t fix much.

When does refinancing make sense?

A loan to clear an SBC balance tends to fit when:

• the business is trading well enough to repay a new loan over an agreed term;
• you also have tax arrears and want one plan instead of several;
• default interest and IRD’s collection steps are adding cost and stress; and
• you have property equity or bank statements that show steady income.

Unsecured and cash-flow options are typically $5,000 to $500,000, and property-secured loans run from $20,000 to $5,000,000. See loans to pay IRD debt for how we assess applications.

An illustrative example

Illustrative only. Not a real client and not an offer.

A Nelson boutique took an SBC loan in 2021 and kept up interest, but couldn’t clear the principal by the end of the term. It also owes two GST periods from a slow winter. In total, about $41,000 is owing to IRD. Trading has recovered, but not enough to pay it all at once. A cash-flow loan sized on bank statements pays both debts in full, and the owner’s weekly repayments sit comfortably beside new GST, which now goes into a separate account.

A practical checklist

1. Log into myIR and download the SBC loan balance and any other overdue amounts.
2. Read any notices IRD has sent, especially anything mentioning default or next steps.
3. Work out what you can realistically pay each week or month.
4. Decide whether to propose a plan to IRD or look at refinancing.
5. Make sure current GST and PAYE are being paid, whatever you decide.

How should you approach the conversation with IRD?

If you’d like to pay the defaulted balance over time, contact IRD before it contacts you. Have three things ready: the balance from myIR, what you can genuinely afford each month, and evidence that current tax is being kept up to date. A plan that starts small and is kept is worth more than an ambitious one that breaks in month three.

Keep in mind what an agreed plan does and doesn’t do. It gives you time and helps avoid enforcement, but interest still runs on what’s owed, so the total paid will be higher the longer it takes. If IRD won’t agree to what you can afford, or wants the balance cleared faster, refinancing becomes the practical alternative. Our arrangement vs loan cost check helps you compare the two in dollars.

Does a defaulted SBC loan affect future borrowing?

It can. Any lender assessing your business will want to know about money owed to IRD, and a defaulted government loan is a question you’ll need to answer. The good news is that a clear explanation and a plan usually matter more than the default itself. Clearing it, or having a documented arrangement, shows a lender the issue is being handled. Leaving it to drift is what causes lasting damage.

Ask us about clearing it

If your SBC term has ended with money still owing, send a quick enquiry. It won’t affect your credit score to ask, your details aren’t offered around to other lenders, and a real person will call to talk it through. Include the SBC balance and any tax arrears as accurately as you can so we can see the whole picture straight away.