Extension to SME Loan Guarantee Scheme

Beginning on the 1st of April, the $1.2 billion stimulus bill – which also contains relief provisions for the tourism industry – promises an extension to the Government’s SME Loan Guarantee Scheme. The package will also see significant changes made to the bill, including expanded eligibility requirements and an increase to the Government guarantee. 

Announced today by Prime Minister Scott Morrison and Treasurer Josh Frydenberg, the expansion will see the limit of eligible loans rise from $1 million to $5 million. Furthermore, the eligible turnover cap has increased from $50 million to $250 million, meaning businesses with a high turnover also stand to benefit from the new changes.

The expanded scheme will only be available to those who received Jobkeeper payments between January 4th and the 28th of March, and those who applied during the first phase of the scheme. With loans available from the 1st of April till the 31st of December, the Government expects over 350,000 current JobKeeper recipients to be eligible for a loan under the new thresholds. To put that in perspective, currently, only 35,000 loans (worth approx. $3 billion) have been provided under the existing scheme.

Other significant changes to the scheme will see borrowers being offered a repayment holiday on both principal and interest for up to 24 months, with loan terms being increased from 5 years to 10 years. The government will also be taking on a higher portion of the loan guarantee. Currently, the loans have been split 50/50 between the government and the banks. These changes will see a shift in the cost split, with the government taking on an 80/20 split. 

Importantly, the Loan Scheme can also be used by eligible businesses to refinance their existing loans, including those taken out during the first phase of the program. This will allow SMEs to access the more concessional interest rates available under the program and to better manage their cash-flows through an extended loan term and lower combined repayments. The full conditions of the SME Guarantee Loan Scheme can be found here, on the Treasury website. 

“This SME Recovery Scheme is part of the next step in our plan to help small businesses stand on their own two feet as the economy recovers from COVID-19,” says Josh Frydenberg, “The expansion and extension of the loans will back businesses that back themselves and will help businesses who continue to do it tough to build a bridge to the other side of the crisis and keep their staff employed.”

In addition to the changes to the SME Loan Guarantee Scheme, the $50 million Business Events Grants Program will also be extended by three months to support Australian businesses to hold multi-day business events, covering up to half of the costs incurred in participating business events during the 2021 calendar year. 

Finally, the stimulus package contains considerable relief for the Tourism and Aviation sectors. 800,000 half-price airfares to a number of domestic tourism hotspots will be made available to Australians, hoping to help the Tourism sector recover faster from the effects of Covid-19. The Aviation sector also received several support programs that support domestic and international services until regular travel resumes. A more complete look at the terms and aims of the stimulus bill can be found here, via this Government press release.

The information in this article is of a general nature. It does not take your specific needs or circumstances into consideration. You should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

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