The Federal Government has changed its SME Recovery Loan Scheme so that more businesses can access cheaper credit and additional funding.
The SME Recovery Loan Scheme has been rejigged to provide financial support to eligible small and medium enterprises until 31 December 2021.
The scheme was created to bolster the economy and provide continued relief to businesses that have been impacted by lockdowns or floods earlier this year.
The 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.
Financial support available to struggling businesses
Participating lenders will offer the following guarantees under the updated scheme, according to the Federal Government.
- 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.
- 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, 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.
Westpac and NAB have 'welcomed' new changes
Westpac and NAB have already jumped on the new announcement, saying that they welcome the changes and will continue to support businesses experiencing hardship due to lockdowns.
Andrew Irvine, NAB Group Executive Business & Private Bank, said SME Recovery Loans are a 'good option' for businesses who need additional capital, and that expanding the eligibility criteria is a 'positive step'.
"Many small businesses across Australia are continuing to do it tough due the impact of extended lockdowns and border closures," Mr Irvine said.
Peter King, Westpac CEO, said that the SME Recovery Loans help keep businesses going.
"We encourage any business customers worried about their finances to give us a call so we can work through what help may be available for them," Mr King said.
The following lenders are currently participating in the SME Loan Recovery Scheme according to the Federal Government.
- Bank of Queensland
- Commonwealth Bank of Australia
- Fifo Capital Australia
- Get Capital
- Judo Bank
- Liberty Finance
- Moneytech Finance
- National Australia Bank
- Regional Australia Bank
- Social Enterprise Finance Australia
- South West Credit Union Co-operative
- The Mutual Bank
- TrailBlazer Finance
- Unity Bank
- Webster Dolilta Finance Ltd
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