SMEs can now borrow up to $ 5 million under an expanded government loan program
The federal government has expanded a loan program for small and medium-sized businesses, offering loans of up to $ 5 million under its post-JobKeeper support program.
The SME Stimulus Loan Program will build on the SME Guarantee Program established in March last year to provide loans of up to $ 5 million, with 80% of the loan guaranteed by the government and 20% of the loan. % by participating banks.
Announcing the revised lending program today, Treasurer Josh Frydenberg said he would help sectors and regions across the country that “continue to be tough” with “proportionate, timely, scalable and targeted assistance.”
“The expansion and extension of loans will support businesses that support themselves and help businesses that continue to do so hard to build a bridge to the other side of the crisis and keep their staff employed,” he said. Frydenberg said in a statement.
Which companies are eligible?
To be eligible for a loan, businesses must have received JobKeeper between January 4 and March 28 and have a turnover of no more than $ 250 million.
Self-employed workers and non-profit businesses are also eligible.
How will the loans work?
Like the previous SME guarantee scheme, the loans will be offered by participating commercial banks.
The government will guarantee 80% of the loan amount to help encourage more banks to offer business loans.
Both secured and unsecured loans will be permitted under the program.
What can I use the loan for?
Loans can be used to support investment, refinance pre-existing debt, including debt from the previous SME guarantee scheme.
Loans can also be used to buy commercial property and acquire another business.
However, they cannot be used to purchase residential real estate, financial products, or rent, lease, lease or purchase existing assets that are more than half of their effective life.
How much can I borrow?
Businesses can access up to $ 5 million in total.
What is the term of the loan?
The loans will be offered for terms of up to 10 years, with the option of a period of repayment leave.
Can I take reimbursement leave?
Lenders can offer borrowers a repayment holiday of up to 24 months.
What is the interest rate?
The interest rate on the loans will be determined by the lenders with a cap of around 7.5%.
The government said there would be some flexibility for interest rates on variable rate loans to rise, if market interest rates rise in the future.
Banks must disclose the effective interest rate, including whether it is variable or fixed, to the borrower when the loan is made.
During repayment holidays, interest will continue to accrue and businesses will have to repay accrued interest once repayments are restarted.
What if I am unable to repay the loan?
Borrowers are responsible for all loan repayments under the scheme.
If a business is unable to repay, banks will follow standard default processes.
Will borrowers be able to file complaints with the Australian Financial Complaints Authority (AFCA)?
Companies borrowing under the program will still be able to file a complaint with AFCA, but AFCA will not take into account decisions to lend under the program or the amount of a loan.
AFCA will receive complaints regarding rigor or enforcement issues.