The government is extending the loan scheme for small businesses for a further six months.
Small and medium-sized businesses with a turnover of less than $250 million that have been “adversely economically affected by COVID‑19” will be able to access loans of up to $5 million over a term of up to 10 years to help deal with the economic impacts of COVID-19.
The Morrison government will reduce its loan guarantee from 80 per cent to 50 per cent, given that the “economy [is] showing signs of a strong rebound as restrictions ease” and “helping drive a private sector-led recovery,” the government said.
As such, loans under the existing scheme will have a government guarantee of 80 per cent until 31 December 2021 before dropping to 50 per cent between 1 January 2022 until 30 June 2022 under the extended scheme.
Treasurer Frydenberg commented: “The extension of the scheme continues our unprecedented support for SMEs and will help even more businesses get access to the funding they need to adapt, innovate and bounce back from the impacts of the pandemic...
“[The] extension of the scheme will complement our record investment incentives which allow for the full and immediate expensing of the cost of eligible assets.
“The Morrison Government will continue to support small businesses as they seek to rebuild, adapt and create jobs as part of Australia’s economic recovery.”
Around 80,000 loans worth approximately $7.3 billion have been written to date since the scheme commenced in March 2020.
Other key features of the SME Recovery Loan Scheme include:
- Lenders can offer borrowers a repayment holiday of up to 24 months
- 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
- Loans can be either unsecured or secured (excluding residential property)
Move welcomed by industry
Several lenders have welcomed the announcement, with the managing director for commercial and private banking at ANZ, Isaac Rankin, stating: “The extension of the government-guaranteed loan scheme will provide more businesses with access to much-needed finance that will give them the confidence to help them thrive and expand...
“In the last month alone, we have seen twice the number of applications for the loan scheme,” he said.
“One third of applications have come from small businesses in the retail trade, accommodation and cafe and restaurant sectors, all which have been significantly impacted by lockdowns in Victoria and New South Wales.
“Small and medium sized businesses are pivotal in Australia’s economic recovery. As one of the largest employers, SMEs need certainty and finance to help them invest, grow and create jobs.”
Likewise, the Commonwealth Bank of Australia's (CBA) group executive business banking, Mike Vacy-Lyle, said the bank was "very supportive of the extension of the scheme to allow more businesses to take advantage of this low cost funding as we head towards the New Year".
“As the nation reopens, it’s fantastic to see recovery across the sector with many small businesses taking advantage of pent up customer demand and investing for future growth. At the same time, we know some businesses have experienced uneven recovery and continue to need additional support to re-stock, re-hire and generally, get back to business," he said.
“We’re firmly committed to supporting all small businesses. As Australia’s largest bank, we will continue to do what we can to ensure small businesses are supported and set up for success for the future. We encourage businesses to speak to us about how we can help meet their business needs,” Mr Vacy-Lyle added.
CBA has reportedly helped more than 24,000 Australian businesses access more than $2.8 billion in funding support made available through the Commonwealth Bank’s Government-backed SME Guarantee Loan Scheme.
Since the SME Recovery Loan Scheme eligibility criteria was expanded on 1 October 2021, CBA has funded more than half of all loans under the Scheme as part of its commitment to leading Australia’s economic recovery by backing small business.
Mr Vacy Lyle noted that the bank has also been investing in its digital and technology platforms, such as its lending tool BizExpress, to ensure businesses have fast access to a range of financial support and lending, "when they need it most".
National Australia Bank’s (NAB) Andrew Irvine, group executive business and private bank, also commented on the announcement, stating: “With Christmas just around the corner, it’s great to see all parts of the economy getting behind small businesses. The Federal Government’s SME recovery loans are a good option for businesses who need additional capital, helping them stock up or scale up to make the most of bumper Christmas sales.
“I’ve visited dozens of small businesses in recent weeks, they are thrilled to have customers back on the shop floor. Knowing they can access cash gives small businesses the confidence they need to rebuild after a tumultuous two years due to lockdowns and border closures.
“Our customers want to act quickly and respond to opportunities in the market. They have options available via the SME recovery loan and Quickbiz – and for those who may still be struggling, support remains available.”
Similarly, Westpac’s Chris de Bruin, its chief executive, consumer and business banking, said: “This scheme has been a real lifesaver for businesses hit hard by COVID lockdowns, so it’s great to see it extended.”
Noting that Westpac has so far seen more than $600 million in applications submitted since October, Mr de Bruin added: “In recent weeks, we’ve seen a 160 per cent week-on-week increase in applications, with the average deal size doubling since September.”
“Westpac is ready to continue backing customers as they accelerate out of the pandemic, investing and creating jobs to drive economic recovery,” Mr de Bruin said.
The Australian Small Business and Family Enterprise Ombudsman Bruce Billson has also welcomed the Australian government’s extension of the scheme, outlining that small and family businesses are well positioned to lead the national economic recovery as pandemic-related trading restrictions ease, with targeted and ongoing support from the Australian government.
“Small businesses are working hard to get their businesses back up and running after a very challenging couple of years,” Mr Billson said.
“The good news is that COVID-19 conditions are finally settling and that is allowing small business owners to get on with what they do best – growing their business. The extension of the SME Recovery Loan Scheme will offer much-needed cash flow to small businesses, giving them a fighting chance at returning to full strength.
“We hear first-hand from small and family businesses that access to finance allows them to invest and innovate.
“With the Australian Government guaranteeing 50 per cent of loans secured under the scheme, we hope this will increase lender appetite, particularly with a focus on growth and investment lending.
“We really want to see lenders make loans more accessible to small and family businesses, especially for those with clear growth and innovation plans and for ambitious new-to-bank customers seeking finance. Finance is the oxygen of enterprise and those with growth and investment ambitions need additional support.
“It is support for small businesses such as the SME Recovery Loan Scheme, that is contributing to making Australia the best place to start, grow and transform a business.”
[Related: BOQ begins offering SME Recovery Loan Scheme]