SME Recovery Loan Scheme
The New SME Recovery Loan Scheme will Begin as of 1st April 2021 through to 31st December 2021.
With the first federal government’s SME Loan Guarantee Scheme helping over 35,000 expanding the scheme aims to support more businesses affected by the pandemic and boost the economy.
The government will now accept a higher responsibility of the guarantee, moving from a 50/50 backing with banks to the Government providing the banks with guarantee 80% of the loan.
The banks will still assess the credit worthiness of applicants.
Understanding the Eligibility Criteria
A business is eligible for the SME Recovery Loan Scheme if it meets the following conditions:
- Receive a JobKeeper payment between 4th January 2021 and 28th March 2021.
- Have up to $250 million turnover.
The scheme is also open to self-employed individuals and non-profit organisations.
If your business has previously accessed a loan under the SME Guarantee Schemes you are still eligible to apply for this new extended scheme.
What are The Loan Details?
The loans are up to $5 million in total and can be either secured or unsecured, and for a repayment period of up to 10 years.
Lenders are also able to offer a repayment holiday period of up to 24 months.
The interest rate offered is determined by each lender and will generally be capped at 7.5%.
If eligible, your business can use the loan for a number of purposes including:
- To refinance existing debt.
- Purchase residential or commercial property.
- Lend to another associated entity of the business.
- Invest in assets, technology, or equipment.
Applying for the Loan
Loans backed by the Scheme will be available through participating commercial lenders. The decision on whether to extend credit, and management of the loan, will remain with the lender.
The process is as follows:
- Approach a lenderLoans backed by the Scheme will be available through participating commercial lenders. The Government is not directly participating in the lending process.
- Lender makes a decisionThe decision on whether to extend credit, and management of the loan, will remain with the lender.
- If a lender declines your application or you are not satisfied with the product on offer, you can approach other lendersBusinesses are encouraged to shop around and compare products offered by different participating lenders.
Be mindful the SME Guarantee is not a grant or a handout. It is a loan, and the banks expect it to be repaid.
Why Apply for the Loan Scheme?
Some sectors still remain under pressure. For those businesses, the new scheme will provide targeted support and will also help to close the funding gap, giving businesses more time to recover.
Participating banks are also offering loans, including overdrafts, at very low interest rates, to help bridge cash flow gaps.
The Australian Banking Association provides some detail on participating banks: The Australian Banking Association – The Business Relief Package