Lenders will be required to regularly report to APRA on information related to:
- their portfolio of loans guaranteed under the Scheme; and
- individual loans written (at origination)
What are the relevant timing requirements for a loan to be considered a 2021 or 2022 Scheme-backed loan?
Whether a loan is considered a 2021 or 2022 Scheme-backed loan depends upon the date on which the loan is approved and unconditional.
Under the 2021 Scheme, loans must be “approved and unconditional (subject only to any standard market practice conditions precedent to utilisation)” by 31 December 2021 (see Rule 3.2(f)).
Under the 2022 Scheme expansion, the relevant loan must be approved and unconditional during the period 1 January 2022 to 30 June 2022 (inclusive and also subject to the same conditions precedent above).
For example, an existing participating lender unconditionally approves a loan for a SME on 20 December 2021. The loan agreement is not signed by both parties until 10 January 2022. Provided that the loan and SME meet all other eligibility criteria, the loan attracts the 80 per cent guarantee, under the 2021 Scheme. However, if the loan was approved and unconditional after 31 December 2021, it would attract the 50 per cent guarantee under the 2022 Scheme expansion.
Are there any restrictions on pricing of loans under the Scheme?
The interest rate on loans will be determined by lenders, but will be capped at around 7.5 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.
- Variable rate loans will be subject to a maximum interest rate of 7.5 per cent per annum over the BBSY rate.
- Fixed rate loans will be subject to a maximum interest rate of 7.5 per cent per annum.
Lenders must disclose the effective loan interest rate to the borrower at the time of the loan agreement.
Fees will be determined by lenders but can only be charged to the extent they are consistent with fees on similar loans outside the Scheme. No fees are permitted to be applied to undrawn facilities.
How is the interest rate cap determined for variable rate loans?
The Interest Rate Cap as defined in the rules is copied below:
- Variable, the aggregate of:
- The Margin; and
- The greater of:
- The Bank Bill Swap Rate as published from time to time as of 10:30am (Sydney time) and for the period equal in length to the interest period of the relevant Scheme‑Backed Loan; and
- 0%; or
- Fixed, 7.5%
The Bank Bill Swap Rate (BBSW) is administered by ASX Benchmarks Pty Limited. Please see the ASX website for more information: https://www2.asx.com.au/connectivity-and-data/information-services/benchmarks/benchmark-data.
How should loans offered under the Scheme be enforced?
Lenders will have discretion in their recovery and enforcement approach. Lenders will utilise their normal recovery procedures, including deciding whether to take enforcement action. Enforcement is not a precondition to making claims on the Government guarantee. Sale to a third-party debt collector is not permitted.
When can losses be claimed under the Government guarantee?
Lenders can claim losses under the Government guarantee after a Scheme-Backed Loan is impaired or written-off (whichever comes first), in line with lenders’ lending policies.
What is the Government guaranteeing?
Under the 2021 Scheme, the Government will guarantee 80 per cent of eligible loans issued by participating lenders until 31 December 2021. However, under the 2022 Scheme expansion, the Government will guarantee 50 per cent of eligible loans issued by participating lenders until 30 June 2022. Each guarantee applies to both principal and interest. See ‘What are the relevant timing requirements for a loan to be considered a 2021 or 2022 Scheme-backed loan?’ for further information.
For more information about making a claim under Phases 1 and 2 of the SME Guarantee Scheme, the Show Starter Loan Scheme or the SME Recovery Loan Scheme please contact the Business Grants Hubs on 13 28 46 or via email smeguarantee@industry.gov.au.