December 23, 2021

New amendments and expansion of the SME Recovery Loan Scheme

The SME Recovery Loan Scheme terms have been amended and expanded due to the ongoing economic impact of the COVID-19 pandemic. The 2022 Scheme expansion will now be available from 1 January 2022 until 30 June 2022. This expansion allows SMEs to access loans of up to $5 million with a 50% Government guarantee.

What could this mean for your business? Read on to find out more.

What is the SME Recovery Loan Scheme?

In April 2021, the Government announced the SME Recovery Loan Scheme (also known as the Scheme). The Scheme was designed to support economic recovery after the coronavirus Stimulus Package ended, and to provide continued assistance to small and medium enterprises dealing with the economic impacts of the coronavirus pandemic.

The Scheme was first intended to be available from 1 April 2021 through to 31 December 2021, with the government guaranteeing 80% of the loan amount. However the 2022 Scheme expansion means it will be extended, with some amended rules, until 30 June 2022.

Which businesses are eligible for the SME Recovery Loan Scheme?

The scheme is open to small and medium-sized enterprises with a turnover of up to $250 million, including self-employed individuals and non-profits. The Scheme has been open 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 prior to 1 October 2021)
  • Affected by the floods in eligible LGAs in March 2021 (only approved under this eligibility criteria prior to 1 January 2022)
  • Adversely economically affected by COVID-19 (can only be approved under this eligibility criteria prior to the Scheme Expansion Date, 1 October 2021).

What can loans issued under the SME Recovery Loan Scheme be used for?

The Scheme’s loans can be used to refinance existing loans, or for a broad range of business purposes, including to support investment.

  • The loans 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 halfway into their effective life.

Any pre-existing debt owed by a qualifying borrower, including those from the SME Guarantee Scheme, may be refinanced with these loans.

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What are the updated terms of the SME Recovery Loan Scheme?

Participating lenders are offering guaranteed loans on the following conditions 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 adversely economically affected by COVID‑19
  • 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

Loans from the Scheme will be available through participating commercial lenders. The lender retains ultimate authority over the loan’s terms and conditions, including extending credit and the managing the loan

In conclusion

The SME Recovery Loan Scheme has been amended to include increased support for small and medium business enterprises that are financially impacted by the COVID-19 pandemic. The new terms of the scheme are designed to ensure that it is easier for eligible businesses to access up to $5 million in loans with a Government guarantee of 50%.

If you’re looking for assistance with your own small or medium-sized enterprise, contact us today. Our team of experts are here to help you find financing solutions that work best for you.

Filed Under: Financial Awareness, General, Growth

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