The government is revamping its SME Loan Guarantee Scheme in the hope of getting a better take-up of the little-used A$40 billion program. However, the revised scheme is only open to recipients of JobKeeper payments.
Treasurer Josh Frydenberg announced yesterday that under the re-branded SME Recovery Loan Scheme, the government will increase the level of its guarantee from 50 per cent to 80 per cent.
The maximum loan size will increase from $1 million to $5 million and the maximum eligible business turnover will rise from $50 million to $250 million. Maximum loan terms increase from five to 10 years.
The revised scheme is only open to recipients of JobKeeper payments between 4 January 2021 and 28 March 2021.
The original scheme will remain open to eligible borrowers until 30 June. SMEs with a loan under the original scheme will be able to apply for a new loan under the new scheme.
The revised scheme will allow lenders to offer borrowers a repayment holiday of up to 24 months.
Eligible business will be able to use the scheme to refinance existing loans. Loans can be unsecured or secured (although not secured by residential property).
Interest rates will be set by lenders but will be capped at around 7.5 per cent.
Loans will be available from April 1 and must be approved prior to December 31.
The Treasurer said the scheme would provide ongoing support for businesses coming off the JobKeeper program at the end of this month. He said 350,000 current JobKeeper recipients are expected to be eligible under the revised scheme.
The Reserve Bank reported last month that take-up of the original scheme has been low, with about $3 billion of loan commitments made to around 30,000 businesses.
The RBA said this was most likely the result of a combination of weak demand for SME finance and tighter lending standards.
Frydenberg said the change to the guarantee level “will encourage more banks to support small businesses.”
The big banks welcomed the changes, with NAB chief executive Ross McEwan saying the bank would promote the scheme to its business customers.
“With the phasing out of JobKeeper, this is a really comprehensive loan package for those industries that continue to be hit hard by COVID-19,” McEwan said in a statement.