The Federal Government has announced an extension to the SME Guarantee Scheme following our previous article regarding the launch of Phase 2 of the existing SME Guarantee Scheme which came into effect on 1 October 2020.
The new SME Recovery Loan Scheme is targeted at small and medium sized businesses currently receiving JobKeeper and will allow eligible businesses to access additional funding post-JobKeeper from 1 April.
The scheme is designed to assist economic recovery and further help SMEs recover, grow their business and invest for the future.
Loans can be used to:
- refinance existing loans with restrictions;
- purchase commercial property;
- acquire additional equipment;
- acquire another business; and
- fund working capital.
Loans cannot be used to:
- purchase residential property;
- purchase financial products;
- lend to an associated entity or lease; and
- rent, hire or finance existing assets that are more than half way into their effective life.
A number of participating commercial lenders are offering guaranteed loans where the Government guarantee will be 80% of the loan amount with some significant increases in key lending features including:
- Up to $5 million in new lending per business entity ABN (in addition to Phase 1 and Phase 2 loan limits);
- Business loans with a maximum 10-year term;
- Lenders offering borrowers a repayment holiday of up to 24 months;
- Rates to be determined by lenders however capped at around 7.5%; and
- Loans that can be either unsecured or secured (excluding residential property).
Businesses are eligible if they receive a JobKeeper payment between 4 January 2021 and 28 March 2021 and have up to $250 million turnover.
Both self-employed individuals and non-profit businesses are eligible.
Phase 2 of the existing SME Guarantee Scheme will remain open to eligible borrowers until 30 June 2021 and SMEs with Phase 1 or Phase 2 loans will be able to apply for loans in the SME Recovery Loan Scheme provided all eligibility criteria are met.
The loans under the SME Recovery Loan Scheme will be available from 1 April until 31 December 2021.
If you’re interested in knowing more about any of the Government’s SME loan schemes or want to find out if you’re eligible, contact our experts via the form below or on:
Author: Amanda Foo
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