Are you an SME who has felt the impact economically by COVID-19? Could you use financial assistance to get back on your feet? Might be time to consider the SME Recovery Loan Extension.
The SME Recovery Loan Scheme extension to 30 June 2022 is now in place with a reduced Government guarantee of 50 per cent. The change is known as the 2022 Scheme expansion, where loans will be available from 1 January 2022 at the new Government guarantee.
Earlier last year (April 2021), the Government announced the SME Recovery Loan Scheme (also known as the Scheme), which supported economic recovery and provided continued assistance to small and medium enterprises dealing with the economic impacts of the coronavirus pandemic.
Initially, the Scheme was available from 1 April 2021 through 31 December 2021 at a Government guarantee of 80 per cent of the loan amount.
SME Recovery Loan Extension – Eligibility
The Scheme is open to small and medium-sized businesses with a turnover of up to $250 million, including self-employed and non-profits. The Scheme has been available to (so far) eligible SMEs that were:
- The recipient of a JobKeeper payment between 4 January 2021 and 28 March 2021 (only approved under this eligibility before 1 October 2021)
- Affected by the floods in eligible LGAs in March 2021 (only approved under this eligibility criteria before 1 January 2022
- Adversely economically affected by COVID-19 (approval can only be under these eligibility criteria from the Scheme Expansion Date, 1 October 2021).
The loans under the Scheme can be used to refinance existing loans or for a broad range of business purposes, including to support investment. However, the borrower cannot use them to:
- Purchase residential property
- Purchase financial products
- Lend to an associated entity, or
- Lease, rent, hire or hire purchase existing assets more than halfway into their effective life.
These loans can refinance any pre-existing debt of an eligible borrower, for example those from the SME Guarantee Scheme.
Key Features
Participating lenders are offering guaranteed loans on the following terms under the SME Recovery Loan Scheme (2022 Scheme expansion):
- 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 feeling the effects economically of COVID‑19
- the expanded Scheme will commence on 1 January 2022 and end on 30 June 2022.
- lenders can offer borrowers a repayment holiday of up to 24 months
- loans can cover a broad range of business purposes, including investment support
- loans may 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 lenders will set the interest rate on loans but will have a maximum set at around 7.5 per cent. Some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time
Loans backed by the Scheme will be available through participating commercial lenders. The decision to extend credit and the loan management remains with the lender.
The SME Recovery Loan Scheme may be a viable option for your business experiencing financial hardship. If you want to know more about this Scheme, you can begin that conversation with a participating lender or us.
