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Small to Medium Enterprise Recovery Loan Scheme

If you were receiving the Jobkeeper supplement during the March 2021 quarter or have been recently impacted by flooding, you may be eligible for a SME Recovery Loan. Contact O’Regan & Partners and we can guide you through the process and assist you with determining eligibility.

The Australian Government has introduced the Recovery Loan scheme to support small businesses following the termination of the Jobkeeper Scheme. The Government will be working together with lenders to ensure that eligible enterprises will have access to finance to maintain and grow their businesses, by enhancing lender’s ability to provide loans at a cheaper interest rate.

This scheme builds on the framework established in the two phases of the Coronavirus SME Guarantee Scheme and will remain open to eligible SME’s from 1 April 2021 and 31 December 2021. SME’s with Phase 1 or Phase 2 loans will be able to apply for loans in SME Recovery Loan Scheme, provided they meet eligibility criteria.

Eligible Businesses

This scheme is open to SME’s that were recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021 or were affected by the floods in eligible local government areas in March 2021. This scheme specifically targets small businesses with a turnover up to $250 million. Self employed individuals and not-for-profit entities are also eligible. Businesses that have accessed loans in Phase 1 and Phase 2 can also apply for loans under the scheme.

Key Features

Participating lenders are offering guaranteed loans on the following terms under the SME Recovery Loan Scheme:

  • The Government guarantee will be 80% of the loan amount.
  • Lenders may offer borrowers a repayment hold of up to 24 months.
  • Loans can be used for an array 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.
  • There is a maximum loan amount of $5 million for borrowers, in addition to the Phase 1 and Phase 2 loan limits.
  • The term of the loans is capped at 10 years, with an optional repayment hold 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.

Loan Types and Uses

Lenders can offer any product suitable to the borrower, with the exception of:

  • Credit cards.
  • Charge cards.
  • Debit cards.
  • Business cards.

Loans issued under the Scheme may take any other form of credit, provided the Scheme’s eligibility criteria are met.

Loans issued under the Scheme cannot be used for the following:

  • Purchase residential property.
  • Purchase financial products.
  • Lend to an associated entity.
  • Lease, rent, hire or hire purchase existing assets that are more than halfway into their effective life.

This scheme does allow for loans to be used to refinance existing loans or for a broad range of business purposes, including to support investment. Loans can be used to purchase non-residential real property (such as commercial property) or for the acquisition of another business. Lenders will be able to rely on a declaration from the borrower regarding the purpose of the loan.

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.

Applying for a Loan

Loans backed by the Scheme will be available through participating commercial lenders. The decision on whether to extend credit, and management of the loan, will remain with the lender.

Borrowers can access credit under the Scheme through any lenders approved to participate.