What is the SME Recovery Loan?

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Were you receiving JobKeeper for the January quarter? You may be eligible for the Small-to-Medium Enterprises (SME)  Recovery Loan. The Government has introduced a Recovery Loan Scheme to aid businesses with the termination of JobKeeper. The Government will work with lenders and ensure that eligible firms will have access to finance to maintain and grow their businesses when JobKeeper ends.

This will enhance lender’s ability to provide loans at a cheaper rate, leading to SMEs being able to access additional funding to get through the detriment of Coronavirus.

The Scheme builds on the framework established in the two phases of the Coronavirus SME Guarantee Scheme and is specifically targeted at SMEs currently receiving JobKeeper. The only SMEs that are eligible are recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021.


Who’s eligible?

The only SMEs that are eligible are recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021, specifically SMEs with up to $250 million turnover. Both 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.


What are the key features?

Participating lenders are offering guaranteed loans on the following terms under Phase 2:

  • The Government guarantee will be 80% of the loan amount.
  • Lenders are allowed to offer borrowers a repayment freeze period of up to 24 months.
  • Loans can be used for a variety 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.
  • The maximum loan amount is $5 million in total, in addition to the Phase 1 and Phase 2 loan limits.
  • Loans have a maximum time frame of 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; however they will have a maximum rate of 7.5 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.


What types of credit are available?

Lenders can offer any product suitable to the borrower except for the following:

  • Credit cards
  • Charge cards
  • Debit 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 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.


In saying this, these loans can be used to purchase non-residential real property (such as commercial property) or for the acquisition of another business.

Loans may be used to refinance any 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 must disclose the effective interest rate whether the interest rate is fixed or variable. Lenders will be able to rely on a declaration from the borrower for the purpose of the loan.


How do you apply for this 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.

Contact Link Advisors if you think you’re eligible for this loan and we can guide you through the process.