Coronavirus (COVID-19) updates from the Australian Government

Information for SMEs

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The scheme is open to small and medium sized businesses with up to $250 million turnover, including self-employed and non-profits. So far, the Scheme has been open to eligible SMEs that were:

  • the recipient of a JobKeeper payment between 4 January 2021 and 28 March 2021.
    Note: a JobKeeper Scheme-Backed Loan can only be approved under this eligibility prior to the Scheme Expansion date (1 October 2021);
  • affected by the floods in eligible Local Government Areas in March 2021; or
  • adversely economically affected by COVI-19. Note: a Covid Scheme-Backed Loan can be approved under this eligibility from the Scheme Expansion Date (1 October 2021).
  1. Approach a lender
    Loans backed by the Scheme will be available through participating commercial lenders. The Government is not directly participating in the lending process. 
  2. Lender makes a decision
    The decision on whether to extend credit, and management of the loan, will remain with the lender. 
  3. If a lender declines your application or you are not satisfied with the product offer, you can approach other lenders
    Businesses are encouraged to shop around and compare products offered by different participating lenders. 

Lenders can offer any product suitable to the borrower, with the exception of credit cards, charge cards, debit cards or business 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 can be used to refinance existing loans or for a broad range of businesses purposes (including to support investment) but cannot be used to:

  • purchase of residential property;
  • purchase of financial products;
  • lending to an associated entity; or
  • lease, rent, hire, hire-purchase existing assets that are more than half way into their effective life.

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.

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.

  • Unsecured and secured lending will be permitted under the Scheme.
  • Lenders are permitted to take guarantees.
  • For secured loans, lenders will be permitted to take any security except residential property.

Why have the Scheme Rules been amended?

On 25 August 2021, in recognition of the continued economic impacts of the Coronavirus Pandemic, the Government announced that the SME Recovery Loan Scheme would be expanded to provide support to SMEs adversely economically affected by the Coronavirus Pandemic.

To reflect the change in policy, the Commonwealth amended the Scheme Rules and executed an Amending Deed (SME Recovery Loan Scheme Guarantee). The amended Scheme Documents will come into effect on the Scheme Expansion Date (1 October 2021).

The following key changes have been made to the Scheme Rules:

  • Rule 3.1(d): A new eligibility criterion for SMEs that are adversely economically affected by the Coronavirus Pandemic applies from the Scheme Expansion Date (1 October 2021). This replaces the previous eligibility critierion of having received JobKeeper in the March 2021 quarter. The alternative eligibility criterion for flood-affected SMEs remains.
  • Rule 3.3(b): Eligible borrowers need to demonstrate that they have been adversely economically affected by the Coronavirus Pandemic – this can be done by providing an SME Declaration obtained by the Participating Lender.
  • Rule 4.3(b): The relevant APRA Reporting Standards for APRA Report Entries have been updated to refer to the three different categories of Scheme-backed loans.
  • Rule 8.4(c): The exclusion of arrears due to a repayment deferral in response to the Coronavirus Pandemic is extended from 31 March 2021 to 30 September 2021.

When do the new Scheme Rules become effective?

The amended Scheme Rules are effective from 1 October 2021, ten business days after notification of the amended documentation.

As previously announced, the loan writing period for the Scheme closes on 31 December 2021.

Will the features of the Scheme change with the new eligibility?

No. The Scheme will include the same generous features as previously announced for the expanded eligibility, including:

  • Lenders are allowed to offer borrowers a repayment holiday of up to 24 months.
  • Borrowers can access up to $5 million in total, in addition to the Phase 1 and Phase 2 loan limits.
  • Loans are for terms of up to 10 years, with an optional repayment holiday period.
  • Loans can be used for a broad range 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.
  • Loans can be either unsecured or secured (excluding residential property).
  • 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.

How can I apply for a loan under the Scheme?

Loans backed by the Scheme are available through participating bank and non-bank lenders. The Government is not directly participating in the lending process. Provided a Participating Lender complies with the Scheme rules, decisions on whom to lend to and how are ultimately commercial decisions for Participating Lender and the Government does not have the power to intervene in these decisions.

Once amendments to the Scheme documents are effective, Participating Lenders will be able to approve loans under the new eligibility in the Scheme.

If I am 30 or more days in arrears, am I able to refinance into a SMERLS loan?

Under the previous SMERLS Scheme Rules (Rule 8.4(c)), a borrower that has received a deferral in response to the Coronavirus Pandemic after 31 March 2021, would need to be less than 30 days in arrears in order to refinance. The Scheme Rules are amended so that a borrower that has received a deferral in response to the Coronavirus Pandemic prior to 30 September 2021 is able to refinance, even if they are 30 or more days in arrears.

Can I apply for more than one loan under the SME Recovery Loan Scheme, as a recipient of different eligibilities?

Yes, an eligible SME can apply for multiple loans with different eligibilities under the SME Recovery Loan Scheme, as long as the total of these loans does not exceed $5 million.

Following the Scheme expansion, is it still possible to obtain a Scheme-Backed Loan under the Flood Affected eligibility?

Yes, it is still possible to obtain a Flood Affected Scheme-Backed Loan. The Flood Affected eligibility expires when the Scheme closes for new loans, on 31 December 2021. An otherwise eligible borrower would need to have been adversely economically affected by the NSW Floods in March 2021, and either be located or operating in a Flood Affected Local Government Area.

Following the Scheme expansion, is it still possible to obtain a Scheme-Backed Loan under the Job Keeper eligibility?

It is possible to obtain a JobKeeper Scheme-Backed Loan prior to the Scheme Expansion Date (1 October 2021). From the Scheme Expansion Date, a borrower would need to demonstrate they meet the eligibility criterion for a COVID Scheme-Backed Loan instead.

Can I take out a loan under the SME Recovery Loan Scheme if I already have a loan under Phase 1 or Phase 2 of the SME Guarantee Scheme?

Businesses that have accessed loans in Phase 1 and Phase 2 of the SME Guarantee Scheme can apply for additional loans of up to $5 million in the SME Recovery Loan Scheme.

How does a business satisfy the Scheme eligibility criteria that a borrower must be adversely economically affected by the Coronavirus pandemic?

There are many different ways a business may be adversely economically affected by the Coronavirus Pandemic. This includes, but is not limited to, a decline in business income. There should be an impact on the borrower, as a result of the Coronavirus pandemic, as at the loan application date.

As part of the loan application process, a Participating Lender may request a borrower attest that they satisfy this eligibility criteria. This attestation may form part of a declaration (commonly known as the SME Declaration).

What is the Government guaranteeing?

The Government will guarantee 80 per cent of eligible loans issued by participating lenders under the SME Recovery Loan Scheme. The guarantee will apply to both principal and interest.

How is a borrower defined under the amended Scheme?

The scheme is open to small and medium sized businesses with up to $250 million turnover, including self-employed and non-profits. So far, the Scheme has been open to eligible SMEs that were:

  • The recipient of the JobKeeper payment between 4 January 2021 and 28 March 2021;
    Note: that a JobKeeper Scheme-Backed Loan can only be approved under this eligibility prior to the Scheme Expansion date (1 October 2021).
  • affected by the floods in eligible Local Government Areas in March 2021; or
  • adversely economically affected by COVID 19. Note: a Covid Scheme-Backed Loan can be approved under this eligibility from the Scheme Expansion Date (1 October 2021).

How will the Scheme help businesses?

The SME Recovery Loan Scheme is providing additional support to small and medium sized businesses that continue to deal with the economic impacts of the coronavirus crisis. It will encourage more banks to support small businesses and demonstrates the Government’s commitment to back those businesses that are prepared to back themselves.

The SME Recovery Loan Scheme builds on earlier loan schemes introduced during COVID-19, under which around 77,000 loans totalling around $6.5 billion were written.

My insurance covers the damage to my business from the storms and floods in March. Can I still apply for a loan under the SME Recovery Loan Scheme?

Yes. Your entitlements under any commercial insurance contract does not affect your eligibility to apply for the SME Recovery Loan Scheme.

Is interest still charged during a repayment holiday?

Yes. If you are on a repayment holiday under a Scheme-Backed Loan, you will not have to make any repayments during the holiday period. However, interest will continue to accrue on the loan, which you will have to repay when payments recommence at the end of the holiday period.

What if I cannot repay the loan?

Borrowers are fully responsible for repaying loans made under the Scheme. If the borrower is unable to meet repayments, lenders will follow usual default processes.

I am a not-for-profit. Am I eligible for the Scheme and how do I access it?

Not-for-profits are eligible for the Scheme, provided they have turnover of less than $250 million and have an ABN. Non-profit bodies seeking to apply for the Scheme should contact a Participating Lender.

Will borrowers or guarantors be able to make complaints to the Australian Financial Complaints Authority (AFCA) with respect to loans made under the Coronavirus SME Guarantee Scheme?

Borrowers will still be able to make complaints to AFCA with respect to loans made under the SME Recovery Loan Scheme however AFCA will not take into account decisions to lend under the Scheme or the amount of a loan. Borrowers will still be able to have complaints heard by AFCA for other decisions of the lender, such as issues related to hardship or enforcement.

If the lender requires a guarantee for a loan under the Scheme, the guarantor will still be able to make complaints to AFCA with respect to this decision.

The Government is currently considering applications from lenders interested in participating in the SME Recovery Loan Scheme.

The following lenders have been approved to participate in the SME Recovery Loan Scheme.

  • ANZ
  • Bank of Queensland
  • Commonwealth Bank of Australia
  • Fifo Capital Australia
  • Get Capital
  • Judo Bank
  • Liberty Finance
  • Moneytech Finance
  • National Australia Bank
  • Regional Australia Bank
  • Social Enterprise Finance Australia
  • South West Credit Union Co-operative
  • Suncorp-Metway
  • The Mutual Bank
  • TrailBlazer Finance
  • Unity Bank
  • Webster Dolilta Finance Ltd
  • Westpac