New Government Scheme Offers Up To $5 million To Eligible Small Businesses

With the end of the JobKeeper scheme comes another government initiative designed to support SMEs toward post-pandemic economic recovery.

The new scheme, dubbed the SME Recovery Loan Scheme, is the latest move in the federal government’s efforts to stimulate the economy and help businesses affected by COVID-19 and the recent March floods get back on their feet.

The scheme enhances lenders’ ability to provide cheaper credit to eligible businesses with the government guaranteeing 80% of the loan amount and participating banks covering the other 20%.

Treasurer Josh Frydenberg says, “The expansion and extension of the loans will back businesses that back themselves, and will help businesses who continue to do it tough build a bridge to the other side of the crisis and keep their staff employed.”

It also allows for extended repayment holidays of up to 24 months providing some much-needed relief as spas and clinics aim to get business back to normal and revamp their financial plans. While interest rates will be determined by individual lenders, the government has put a cap of 7.5% and has highlighted that there is scope for interest rates on variable rate loans to rise if market interest rates increase in the future.

Loans are for terms of up to 10 years and can either be secured or unsecured however there are some limitations on what it can be used for.

Borrowers can access up to $5 million in total to use on a broad range of businesses purposes including refinancing any pre-existing debt of an eligible borrower. It can’t be used to purchase residential property, purchase financial products or to lease or rent assets that are more than halfway into their effective life.  

As for who is eligible, it’s only open to SMEs with a turnover of up to $250 million that were recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021 or those affected by the floods in eligible Local Government Areas in March 2021. 

The scheme remains open to eligible borrowers until 30 June 2021 and can be applied for through participating banks.

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