Business Loans under phase 2 SME Guarantee Scheme

In October 2020, the Federal Government launched phase 2 of the SME Guarantee Scheme to continue to provide small to medium businesses with better access to additional funding. The scheme enhances lenders’ ability to access additional funding and provide cheaper credit, assisting SMEs to recover from the changing operating conditions and invest for the future.

Loans issued under the scheme can be used for a wide range of purposes including purchasing commercial property, acquiring additional equipment and funding working capital. Businesses do not need to show that they have been affected by the pandemic, the scheme is built to assist the economy and SME market as a whole.

The funds cannot be used to purchase residential property, purchase financial products or lease, rent, hire or finance existing assets that are more than half way into their effective life.

A number of the banks are offering similar variations of the following:

  • Up to $1 million new lending per business entity ABN;
  • Business loans with a maximum 5-year term;
  • Lines of credit with a maximum 4-year term;
  • Rates often range from 2.5% to 5% p.a;
  • Each request will be assessed by the lender on a case by case basis; and
  • Loan-to-Value Ratio outside the usual operating limits (often lending up to 70% under this scheme).

Businesses with an annual turnover of less than $50m in FY20 or FY21 (projected) may apply for a loan under this scheme until 30 June 2021. In our experience you should allow 4-6 weeks for a loan to be approved.

In our experience, the key to a smooth turnaround of your funding request lies in the preparation and presentation of the information that lenders require. If your business has been affected by Covid-19, it pays to think ahead about the question’s lenders will ask as to how your business is responding to the impact of Covid-19 and the road to recovery.

If you’re interested in learning more about the scheme or about the banks’ offerings, please contact our banking and finance experts on:

Brisbane – Angela Winton or Owen Dingle

Melbourne – Brad Purvis

Sydney – Jeremy Mortlock

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166

Authors:  Owen Dingle and Angela Winton

Published: 08/02/2021

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