On Thursday (11 March), the Prime Minister and Treasurer Josh Frydenberg unveiled a new $1.2 billion support package to help small businesses recover from the impact of the coronavirus pandemic.
The package, which largely targets airlines, hotels and caravan parks, restaurants and bars, travel agents and tourism operators, includes an expansion and extension of the Coronavirus SME Guarantee Scheme.
The new SME Recovery Loan Scheme is specifically targeted at SMES that received the JobKeeper payment between 4 January 2021 and 28 March 2021.
Under the new phase, the government will guarantee 80 per cent of the loan (up from the existing 50/50 split between government and banks).
The expanded scheme will also increase the size of eligible loans (which can be either secured or unsecured, excluding residential property) from $1 million to $5 million.
Loan terms will increase from five to 10 years and lenders will be allowed to offer borrowers a repayment holiday of up to 24 months.
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”.
The maximum eligible turnover for businesses will also increase from $50 million to $250 million.
Businesses will be able to use the SME Recovery Loan Scheme for a broad range of business purposes, including to support investment (for example, the acquisition of another business) and for the purchase of commercial property.
Loans will be available from 1 April 2021 and must be approved prior to 31 December 2021.
Several lenders have welcomed the new loan scheme, particularly given the impending cessation of JobKeeper.
ANZ chief executive officer Shayne Elliott said: “The expanded SME loan scheme will enable those businesses hardest hit to access the necessary capital to take advantage of a recovering economy. It’s targeted where required, inclusive where it needs to be and has the full support of ANZ.”
He continued: “The government’s decisive intervention throughout the pandemic has resulted in a faster economic recovery than otherwise would have been possible with Australian businesses and households in much better shape as a result.”
Matt Comyn, CEO of CBA and chair of the Australian Banking Association, said: “Small and medium-sized businesses play a critical role in the economic life of the country, and the varied forms of financial support provided over the past 12 months by government and the banking industry has been essential in helping many SMEs pilot their way through the recession caused by COVID-19.
“CBA is proud of the role we’ve played in the small-business loan guarantee scheme to date, providing around half of the $2 billion in financial assistance.
“While many sectors of the economy are now benefitting from the strong recovery, it is important that we continue to support those businesses who have yet to get back on their feet. Added together with the other measures announced by the federal government… for targeted support to the aviation and tourism industries, this latest loan guarantee initiative will also help to provide low-cost finance for SMEs to invest in their businesses, grow jobs and take the opportunities afforded by the recovery.”
National Australia Bank (NAB) also said it would support and help deliver the new phase of the federal government’s SME Recovery Loan Scheme.
NAB Group CEO Ross McEwan commented: “With the phasing out of JobKeeper, this is a really comprehensive loan package for those industries that continue to be hit hard by COVID-19. “The package is a thoughtful extension to the scheme with significant increases in all key components including eligibility and loan size,” Mr McEwan said.
“In particular, the longer-dated terms doubling to a maximum 10 years will be really helpful to businesses that were healthy pre-COVID but struggling in the current conditions.
“We are pleased to see specific support for the aviation and tourism industries, given the particularly heavy load these businesses and their many employees have borne over the past year.”
Suncorp Bank CEO Clive van Horen said the bank supports the next phase of the Government SME Guarantee Loan scheme, adding: “While our team worked hard to help our business customers via our loan deferrals scheme, with most customers now returning to normal repayments, many businesses, particularly in regions impacted by decreased tourism, will welcome this additional support.”
Similarly, Westpac CEO Peter King noted that while many of the bank’s customers are “back on track”, some sectors and geographies “remain under pressure”.
“For those customers, the new scheme will provide targeted support and also helps provide a funding bridge to give businesses more time to recover.
“This scheme is in addition to Westpac’s existing support measures for customers, and as always, we encourage any customer facing challenges to call us and see how we can help.
“We are proud to take the next step in this collaborative government and industry approach to support Australian businesses.”
Both the Australian Banking Association (ABA) and the Council of Small Business Organisations Australia (COSBOA) also welcomed the new scheme.
ABA CEO Anna Bligh said: “This is the right product for the times. It includes more flexibility and will allow small businesses to restock, rebuild and recover.
“The new phase of the scheme will make more businesses eligible and allow banks to provide more funding and support to businesses, particularly those still doing it tough.”
COSBOA CEO Peter Strong stated that the SME Recovery Loan Scheme “sends a message to businesses that wish to perhaps expand their manufacturing base, or those businesses that are still going through a difficult time but know they have a viable business, that they can go to their bank and openly discuss their situation”.
“It provides the flexibility that business people will need in these difficult times,” he said.
Phase 2 of the existing SME Guarantee Scheme will remain open to eligible borrowers until 30 June 2021.
[Related: Westpac cuts SME guarantee scheme loan rates]
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.