SME Business Loans & Recovery Loan Scheme [Updated]

The Australian federal government has recently announced further coronavirus relief options for small and medium-sized business and non-profit bodies, collectively known as SME entities (SMEs). This includes a relaxing of the eligibility for these entities to access short-term business loans under the SME Recovery Loan Scheme.

Why is the Recovery Loan Scheme changing in 2021

Previously only SMEs that were recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021, or those impacted by floods in March 2021, were eligible to apply. These criteria will be removed and the rules amended such that all SMEs with an annual turnover of up to $250 million will be eligible to apply.

Key features of the SME Business Loans under the scheme include:

  • The Government guarantee will be 80% of the loan amount.
  • 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 SME Guarantee 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 (with any asset other than residential property).
  • The interest rate on loans will be determined by lenders but will be capped at around 7.5 percent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.


It is noted that the SME loans cannot be used to:

  • purchase residential property;
  • purchase financial products (shares, units, etc);
  • lend to an associated entity; or
  • lease, rent, hire or hire purchase existing assets that are more than halfway into their effective life.


How does the Federal SME Recovery Loan Scheme work?

The loans are provided by participating commercial lenders with the application period due to cease on 31 December 2021.  An approved list of participating lenders is available on the Treasury website.

For more information, please review the details on the Treasury website page, SME Recovery Loan Scheme.


Need an accountant’s advice for SME Business Loans?

If you have further questions, don’t hesitate to speak with your usual partner or contact our business tax specialists Malcolm Barkle, Lauren Steinheuer, or Dean Vane.

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