The Federal Government has announced it will expand the current SME Recovery Loan Scheme, so that more businesses can access cheaper credit and additional funding.
The SME Recovery Loan Scheme has been revamped to provide financial support to eligible small and medium enterprises until 31 December 2021.
This scheme was created to bolster the economy and provide continued relief to businesses that have been impacted by lockdowns or floods earlier this year.
Previous eligibility requirements to access this financial support have been scrapped to better reflect the recent economic impacts of the coronavirus.
The Scheme Rules will be changed to reflect the updated eligibility criteria, and loans will be available from then, according to the Federal Government.
The Scheme 'enhances' the ability for lenders to provide cheaper credit, allowing small and medium businesses to access additional funding.
The Government stated that it will be working with lenders to ensure eligible firms have access to finance to maintain and grow their businesses.
According to the Federal Government, participating lenders will offer the following guarantees under the updated 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 and refinancing existing debt.
$0 application fee and $0 monthly fee (typically from the bank)
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, from around 2.6% but will be capped at around 7.5%, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.
The following lenders are currently participating in the SME Loan Recovery Scheme.
Bank of Queensland
Commonwealth Bank of Australia
Fifo Capital Australia
National Australia Bank
Regional Australia Bank
Social Enterprise Finance Australia
South West Credit Union Co-operative
The Mutual Bank
Webster Dolilta Finance Ltd
For more information on the scheme, please visit the website, speak with your current lender or broker, or contact your King & Whittle adviser.