The Federal Government is providing additional support to small and medium sized businesses (SMEs) who continue to deal with the economic impacts of the COVID‑19 crisis by expanding eligibility for the SME Recovery Loan Scheme.
In recognition of the continued economic impacts of COVID‑19, the Government will remove requirements for SMEs to have received JobKeeper during the March quarter of 2021 or to have been a flood affected business in order to be eligible under the SME Recovery Loan Scheme.
The Scheme is currently open to SMEs with a turnover of up to $250 million that were recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021 or were affected by the floods in eligible LGAs in March 2021. Both self‑employed individuals and non-profit businesses are eligible. Businesses that have accessed loans in Phase 1 and Phase 2 can also apply for loans under the scheme.
On 25 August 2021, the Government announced that the current requirements for SME’s to have received JobKeeper during the March quarter of 2021 or to have been a flood affected business will be removed. The Scheme Rules will be amended to reflect the updated eligibility and loans will be available through participating lenders once the changes become effective.
Participating lenders are offering guaranteed loans on the following terms under the SME Recovery Loan Scheme:
- The Government guarantee will be 80% of the loan amount.
- 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 to support investment. 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.
Eligible Loan & Products
Lenders can offer any product suitable to the borrower, with the exception of credit cards, charge cards, debit cards or business cards. Loans issued under the Scheme may take any other form of credit, provided the Scheme’s eligibility criteria are met.
Loans issued under the Scheme can be used to refinance existing loans or for a broad range of businesses purposes (including to support investment) but cannot be used to:
- purchase residential property;
- purchase financial products;
- lend to an associated entity; or
- lease, rent, hire or hire purchase existing assets that are more than half way into their effective life.
Loans may be used to refinance any pre-existing debt of an eligible borrower, including those from the SME Guarantee Scheme. There will be some restrictions on refinancing loans, such as not allowing loans that are more than 30 days in arrears to be refinanced; or borrowers who have entered external administration, or are insolvent, to refinance debts. Lenders can vary or restructure loans as long as they continue to meet eligibility criteria (including the maximum loan term) and do not increase the loan limit after approval.
Lenders must disclose the effective interest rate to the borrower at the loan agreement date. For variable rate loans, the lender must disclose the relevant margin and underlying base rate where applicable.
Loans can be used to purchase non-residential real property (such as commercial property) or for the acquisition of another business.
Lenders will be able to rely on a declaration from the borrower in regards to the purpose of the loan.
Loans are available until 31 December 2021.