The SME Recovery Loan Scheme is a Government initiative to help boost the economy and provide ongoing support to small and medium-sized businesses impacted by the pandemic.
What is changing?
Small and medium-sized businesses will no longer need to have been on JobKeeper during the March quarter of 2021 or to have been affected by a flood to be eligible Once the Scheme rules become effective, businesses can apply for their loans through participating lenders.
As detailed on the Government’s website, the Scheme will give lenders the ability to provide cheaper credit, allowing more businesses to access additional funds. The Government will also work with lenders to make sure businesses have access to finance so they can maintain their business and plan for future growth.
The SME Recovery Loan Scheme builds on loan schemes introduced earlier in the year and are available until 31 December 2021.
What are the key features?
As outlined on the Government’s website, participating lenders will be offering guaranteed loans on the below terms under the SME Recovery Loan Scheme:
- The Government guarantee will be 80% of the loan amount.
- In addition to the Phase 1 and Phase 2 loan limits, borrowers can access up to $5 million in total.
- A repayment holiday of up to 24 months can be offered by lenders.
- Loans can be used for a variety of business purposes including to support investment.
- Loans can be used to refinance any pre-existing debt, including those from the SME Guarantee Scheme.
- Loan terms can be 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.
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