SME Recovery Loan Scheme

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The Government’s SME Recovery Loan Scheme is designed to support the economic recovery, and to provide continued assistance to businesses currently on JobKeeper. Phase 1 and 2 of the scheme have previously been advised, with Phase 3 of the SME Recovery Loan Scheme coming into effect from 1 April 2021. The loan scheme is available to businesses who are currently on JobKeeper (i.e. recipients of JobKeeper payments between 4 January 2021 and 28 March 2021) and have turnover up to $250 million. Self-employed individuals and non-profit businesses are eligible. Businesses that have accessed loans in Phase 1 and Phase 2 can also apply for loans under the scheme.

Phase 2 of the existing SME Guarantee Scheme will remain open to eligible borrowers until 30 June 2021, and SMEs with Phase 1 or Phase 2 loans will be able to apply for loans in SME Recovery Loan Scheme, provided they meet eligibility criteria.

Features of the Phase 3 scheme are summarised below;

  • The Government guarantees 80% of the loan
  • Repayment holidays up to 24 months
  • Loan can be used for multiple purposes including to support investment and refinance pre-existing debt, but cannot be used for the following purposes;
  1. Residential property or financial products
  2. Lend to an associated entity
  3. Lease, Rent, Hire or Hire Purchase existing assets are greater than half way into their effective life.
  • Loans up to $5,000,000 in total for a period of up to 10 years, with optional repayment holiday period (this limit is in addition to the Phase 1 and Phase 2 loan limits)
  • 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 in regards to the purpose of the loan
  • Loans can be secured or unsecured (excluding residential property)
  • Interest rates are determined by lenders but capped at 7.50% (variable rate loans may increase depending on the market). Lenders must disclose the effective loan interest rate to the borrower at the time of the loan agreement.
  • Loans will be available from 1 April 2021 and must be approved by 31 December 2021

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.

Loans backed by the SME Recovery Loan Scheme will be available through participating commercial lenders. Businesses interested in the Scheme should approach their lender for further information. If you require assistance or would like further information about the SME Recovery Loan Scheme, please contact your Hall Chadwick QLD advisor.

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