More than 10,000 businesses have defaulted on $177 million worth of loans given out as part of the previous government's Covid-19 support package.
Two years on from the pandemic, IRD is now calling for 129,000 customers to start paying back $2.3 billion worth of Small Business Cashflow loans.
Those who do not or cannot pay up are put on payment plans.
IRD says more than 70 percent of customers have to pay up to $500 a month; with about 4 percent required to pay $1000 a month.
Employers and Manufacturers Association (EMA) head of advocacy Alan McDonald said he was not surprised with that figure given the tough challenges and climate for businesses.
"A lot of those businesses just absolutely tapped out whatever reserves they had, obviously to support their own staff and themselves and keep the business going ... right through Covid. So no reserves," McDonald told Checkpoint.
"Then, earlier in the year, much of the country was hit by some pretty awful weather events and still recovering. So we haven't got through that.
"And amongst all that, we had some staff shortages that affected some businesses' ability to actually fill orders, to the point where they were turning them away.
"And now with high inflation and tight money, we're also seeing the orders dry up."
Figures showed queries around redundancies and restructures doubled at the start of the year and peaked in May to June, but now continued to be much higher than they usually were for the EMA, McDonald said.
"Our consulting teams and our legal teams have been busy trying to help businesses there.
"So, it is very, very tough and there's just been a lot of cost escalation right through businesses. And as I said earlier, their reserves have tapped out and their resilience is probably tapped out as well."
He expected the trend to continue, with more businesses likely to fold.
"If you look at the projections around unemployment rates in particular, which are currently sitting around 3.6 [percent] I think, and projected to go to nearly 5.5 in 2025, that means businesses will have closed as well as those people losing jobs and that's not a great outcome for either side of the equation."
McDonald acknowledged some might have liquidated earlier if it was not for the loans but said others survived because of it too.
"I guess the alternative was very large numbers of layoffs. And I think if you go back to the start of early projections around Covid, some of the unemployment figures that they were projecting were awful."
He believed the government made the right move at the time.
"Nobody would have expected things to have stayed that bad that long. And we're still seeing businesses where, particularly in some sectors, where foot traffic and numbers just haven't come back up to what they were even pre-Covid."
