For many of the 35% of SME’s who relied on JobKeeper for more than 50% of their revenue, the future is feeling somewhat uncertain – to say the least!
Thankfully, there is some relief now available with the release of the last phase of the SME Guarantee Scheme. This phase is being called the SME Recovery Loan Scheme and is being aimed at businesses that still qualified for (and received) JobKeeper from Jan to March this year. Not all lenders will participate in the scheme, it will predominantly be the major banks.
Key points of the SME Recovery Loan Scheme:
Participating lenders are offering guaranteed loans (the Government guarantee will be 80% of the loan amount) on the following CONDITIONS:
- 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. GREAT NEWS!! 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 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.
For what purpose…?
Loans issued under the Scheme can be used to refinance existing loans or for a broad range of businesses purposes (including to support investment) but cannot be used to:
- purchase residential property;
- purchase financial products;
- lend to an associated entity; or
- lease, rent, hire or hire purchase existing assets that are more than half way into their effective life.
Loans may be used to refinance any pre-existing debt of an eligible borrower, including those from the SME Guarantee Scheme. There will be some restrictions on refinancing loans, such as not allowing loans that are more than 30 days in arrears to be refinanced; or borrowers who have entered external administration, or are insolvent, to refinance debts. Lenders can vary or restructure loans as long as they continue to meet eligibility criteria (including the maximum loan term) and do not increase the loan limit after approval.
For more details and to discuss how the SME Recovery Loan Scheme could work for your business please contact us for a no cost, obligation free chat today!