The SME Recovery Loan Scheme is designed to help small to medium-sized businesses recover from the ongoing effects of COVID-19 with affordable business loans.
While the Australian economy is bouncing back quickly, there are many small to medium enterprises (SMEs) that need a bit of support to get back on track.
The Government’s SME Recovery Loan Scheme allows lenders to continue to support SMEs with cost-effective finance solutions through this period of economic recovery.
Loans backed by the Scheme will be available through participating commercial lenders. The decisions to extend credit, and management of the loan, remain with the lender.
Key Features of the Scheme
Participating lenders are offering guaranteed loans on the following terms under the SME Recovery Loan Scheme
- the Government guarantee will be 50% of the loan amount
- the expanded Scheme will not be available for loans to flood affected SMEs that are not adversely economically affected by COVID19
- the expanded Scheme will commence on 1 January 2022 and end on 30 June 2022.
- lenders are allowed to offer borrowers a repayment holiday of up to 24 months
- loans can be used for a broad range of business purposes, including investment support
- loans may be used to refinance any pre-existing debt of an eligible borrower, including those from the SME Guarantee Scheme
- borrowers can access up to $5 million in total, in addition to the Phase 1 and Phase 2 loan limits
- loans are for terms of up to 10 years, with an optional repayment holiday period
- loans can be either unsecured or secured (excluding residential property)
- the interest rate on loans will be determined by lenders, but will be capped at around 7.5 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time
Scheme Loan Purposes
Loans issued under the Scheme can be used for a broad range of businesses purposes including:
- Refinancing existing loans
- Covering overheads
- purchasing non-residential real estate property (such as commercial property)
- Supporting investment
- acquiring another business
Loans under the SME Recovery Scheme cannot be used to:
- purchase residential property
- purchase financial products
- lend to an associated entity
- lease, rent, hire or hire purchase existing assets that are more than half-way into their effective life.
Scheme Eligibility Criteria
The scheme is open to SMEs with a turnover of up to $250 million, including self-employed and not-for-profits that were:
- the recipient of a JobKeeper payment between 4 January 2021 and 28 March 2021 (a JobKeeper Scheme-Backed Loan can only be approved under this eligibility prior to the Scheme Expansion date of 1 October 2021)
- affected by the floods in eligible Local Government Areas in March 2021 (a Flood affected loan can only be approved under this eligibility prior to 1 January 2022)
- adversely economically affected by COVID-19 (a Covid Scheme-Backed Loan can be approved under this eligibility from the Scheme Expansion Date of 1 October 2021)
Every business is different, so it is important to seek advice to determine whether you are eligible, and the scheme meets your funding needs and business objectives.