SME Recovery Loan Scheme: In response to the economic struggles caused by the COVID-19 pandemic, the federal government has announced an extension of its small and medium-sized enterprise (SME) loan scheme.

Following the conclusion of JobKeeper, the government continues to collaborate with lenders to provide financial support to Australian businesses. This assistance aims to help businesses grow and fully recover from the pandemic’s impacts.

The SME Recovery Loan Scheme is an adaptation of the SME Guarantee Scheme introduced in March 2020. It offers loans of up to $5 million, with 80% guaranteed by the government and 20% covered by a participating bank. The original Guarantee Scheme was introduced to assist businesses with reopening and to enable SMEs access to vital additional funding.

Eligibility for the new scheme includes businesses that received JobKeeper between January 4 and March 28, 2021, with a turnover of $250 million or less. The loans can be used for investment, refinancing existing debt, purchasing commercial property, or acquiring another business. They cannot be used for purchasing residential property or leasing existing assets.

The loan terms are up to 10 years, including a repayment holiday option. Interest rates will be capped at around 7.5%, with some flexibility for variable rate loans.

SME Recovery Loan Scheme: Show Starter Loans Scheme

The government has also announced a $250 million COVID-19 Creative Economy Support Package, including a $90 million Show Starter Loans Scheme, to boost the creative sector. These loans, guaranteed 100% by the federal government, aim to fund new events and productions.

Quick and Efficient Access

The government offers a temporary exemption from responsible lending obligations to enable quick and efficient credit access for small businesses. These reforms simplify credit access for small businesses.

SME Recovery Loan Scheme: Reserve Bank of Australia – Supporting the Flow and Reducing the Cost of Credit

The RBA’s package includes a term funding facility for banks, providing low-cost funding to reduce borrowing costs and incentivizing business lending, particularly for SMEs.

Support for Non-ADI and Smaller ADI Lenders in the Securitisation Market

The federal government has allocated $15 billion for the Australian Office of Financial Management (AOFM) to invest in finance markets used by smaller lenders, including non-ADIs and smaller ADIs. This investment aims to provide cheaper funding to these lenders.