2021 SME Recovery Loan Scheme Update

Update 9 November 2021

When this program was first launched it was hard for business to get funds. But the banks attitude around these loans have markedly changed recently as this program is due to expire by 31 December 2021.

Over the past month I have seen:

One business to get loan approval of $3.5m to purchase a warehouse over a 10 year loan and sub 4% interest rates – no repayments for 12 months and no standard commercial property LVR – ie they can borrow 100% of the purchase price instead of the normal 60/70%.
Another business to approach their bank, for a loan under this program – they asked for $100k and were offered $250k and will probably settle on $150k @ 3.95%, no payments for 12 months and loan repaid over 9 years thereafter with no security.
Another business who was knocked back for this loan last year, but the bank has now rang them up and advised them to apply and they are likely to get an approval. In this case it will take out their overdraft and give them working capital to spend on stock and marketing to relaunch / rebrand their business.
Approval for a $1m unsecured loan repayable over 10 years at sub 4% interest rates – which will be used to repay some debt and buy other businesses.

I believe the reason for the change in attitude is due to:

under this program the federal government gave money to the banks in the form of low low low interest rate loans,
because the banks were too strict early on they have not lent the money they were given out by the Govt,
there must be some penalty on the banks if they don’t meet their targets with the govt by 31 December 2021 so they are now running around trying to get as many loans as they can cover the shortfall in lending to date.

What this means is that there is a window of opportunity to get money under this loan scheme that may not be repeated ever (and i have never seen before with business cashflow lending).

So if you could use some cheap funding to:

consolidate expensive debt you incurred during the shutdowns; or,
want funding to expand,

then you might approach your bank about the Banks particular program. Just google “SME recovery loan scheme” and your banks name it will come up with what the bank calls their product and who to talk to. (Note it appears that you have better success rate if you approach your current business bank)

Just remember it is probably the best time ever to apply for an unsecured business loan and if you do not ask your bank asap (this program closes 31 December 2021), you will never know what funding you could have obtained.

Update 25 August 2021

On the 25th of August 2021, the Federal Government released a SME Recovery Loan Scheme Update. This update opens the Scheme up to more businesses.

This scheme is targeted specifically to businesses who are recipients of the JobKeeper payment between 4 Jan and 28 Mar 2021 and your annual revenue is less than $250 million. Both self‑employed individuals and non-profit businesses are eligible.

Under this scheme:

the Federal Gov’t will guarantee will be 80% of the loan amount.
You can have a repayment holiday of up to 24 months (interest will still accrue).
Loans of up to $5m can be used to pay out existing debts. Note loan can’t be credit or charge card based.
Loan term can be up to 10 years and be unsecured.
Interest rate is capped at around 7.5% (can be lower)

Relates to loans between 1 April 2021,and approved by 31 December 2021.

If your business was on any of the State Government Covid business grants (such as JobSaver in NSW or the Victorian Business Costs Assistance Program), this may be enough to buy you the time to keep your business afloat. Approach your bank now to make sure you lodge all the required paperwork and documentation.before this program closes

If you want more information visit https://treasury.gov.au/coronavirus/sme-recovery-loan-scheme

If you want some help with the SME Recovery Loan Scheme, contact me below.

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