New $5 million Recovery Loan Scheme: Is your business eligible?
The government has announced more support for struggling businesses in the form of loans worth up to $5 million. The loans are an extension of the existing SME Guarantee Scheme, and are intended to support businesses after JobKeeper payments wind up on 28 March.
Not only are the loans designed to support Australian businesses that have been impacted financially from the covid-induced economic downturn, but the government hopes they will also help to prop up the economy.
Here's who is eligible for the loans, the loan details and how to apply for one.
Is your business eligible?
Your business is eligible for the SME Recovery Loan Scheme if it meets the following criteria:
- Your business has been receiving JobKeeper payments between 4 January 2021 and 28 March 2021
- The business is a small to medium sized business with up to $250 million in annual turnover
The scheme is also open to self-employed individuals and non-profit organisations, provided the above criteria is met. If your business has previously accessed a loan under the previous SME Guarantee Schemes you're still eligible to apply again for this new extended scheme.
What are the loan details?
The business loans are offered via commercial lenders including the Big Four banks, as well as smaller lenders including Moula and Prospa. However the government is guaranteeing 80% of the loan amount.
The loans are up to $5 million in total and can be either secured or unsecured, and for a repayment period of up to 10 years. Lenders are also able to offer a repayment holiday period of up to 24 months. The interest rate offered is determined by each lender and will generally be capped at 7.5%.
If eligible, your business can use the loan for a number of purposes including:
- To refinance existing debt
- Purchase residential or commercial property
- Lend to another associated entity of the business
- Invest in assets, technology or equipment
How to apply for a loan
If you're eligible, you can apply for a loan from 1 April 2021 and before 31 December 2021.
You need to apply directly through a commercial business loan lender rather than applying via the government. The lender will assess your application and determine the specific loan terms, and the lender also has the right to decline your loan application.
As the details of the loan (including the interest rate, term length and the option for a repayment holiday) are at the discretion of the lender, the government has encouraged businesses to shop around and compare business loans before applying for a loan under this new scheme.