Most Recent Update (June 2022): The SME Recovery Loan Scheme expired on 30th June 2022. The program, which enjoyed mixed success and low approval rates in any case, will no longer be accepting new applicants. Fortunately, there are plenty of other financing opportunities available for Australian SMEs as lending volumes begin to return to pre-pandemic levels. View here: best unsecured business loans / best secured business loans.***

Background – What was the SME Loan Guarantee Program which later became The SME Recovery Loan Scheme?

In the summer of 2020, the government announced a revamped lending initiative targeted at SMEs with a turnover of up to $250 million. The SME Recovery Loan Scheme built on earlier loan schemes introduced during COVID-19. Before the SME Recovery Loan Scheme, the initiative before was Phase 2 of the SME Loan Guarantee Scheme which ended in June 2021.

Eligibility for the SME Recovery Loan Scheme was widened to better reflect the economic pressures Australia encountered through its response to coronavirus. Originally set to expire on Dec 31 2021, the scheme was extended to 30 June 2022 and finally came to an end. The scheme ended with little fanfare and was barely picked up in the media – perhaps an indictment of the limited impact it had

Key features of the SME Recovery Loan Scheme:

• Australian government will guarantee 80% of the loan amount
• Repayment can begin up to 24 months after loan was issued
• The SME Recovery Loan Scheme can be used to refinance existing debt
• Loan term up to 10 years with up to $5m per borrower
• Interest rate capped at 7.5% per annum

How to check for eligibility for business finance:

Should you wish, you can learn more about the expired scheme below. Note this is for informational purposes only and businesses who would like to consider alternative forms of finance should view our best small business loan options and Australian business grants list. In this guide we covered items such as the requirements to borrow under the scheme, how much could be borrowed and what the funds could be used for.

Full Breakdown Including Details of the SME Recovery Loan Scheme, Who was Eligible and How They Could Apply

Following the COVID-19 outbreak in early 2020, the Australian Government announced various initiatives to support SMEs through a period of severe economic disruption. With much disruption still occurring at the end of 2021 and early 2022, the Government decided to extend the SME Recovery Loan Scheme once last time until June 2022. The original lending schemes were somewhat limited in scope but notably, the Australian Government announced that in recognition of the continued economic impacts of the coronavirus, eligibility criteria for the scheme would be widened. The previous requirements for SMEs to have received JobKeeper during the first quarter of 2021 or to have been a flood affected business were removed. The Scheme Rules then simply stated that loans were available to all SMEs with a turnover under $250m and were negatively impacted by the coronavirus pandemic. Arguably, these terms should have been running from the very outset in 2020 to encourage greater uptake and greater approval rates.

The SME Guarantee Scheme vs SME Recovery Loan Scheme

Submit Quick Application for SME Loans

One of the major concerns in regards to the SME Recovery Loan Scheme is SPEED. In previous phases of the government SME loan scheme, businesses were waiting on banks  and lenders for weeks until they received an approval or a rejection. The biggest advantage of applying for a loan via Lend (lend.com.au) was that you will receive indications quickly in regards to your eligibility, and those indications will come after Lend processes your application and submits it to multiple lenders. Additionally and importantly, Lend will offer non-SME-Recovery-Loans for businesses which aren’t eligible.

Nowadays you can use Lend to apply for other SME Loans.

Background Information and Analysis

Rather than a fixed lending amount being capped on the SME Recovery Loan Scheme, SMEs were able to access a total of $5,000,000 across all three phases of the Government’s SME Loan Schemes. With Phase 1 of the SME Guarantee Scheme originally capped at $250,000 and Phase 2 at $1,000,000 this meant borrowers could have accessed up to $4,000,000 through the SME Recovery Loan Scheme.

The loan term was also extended to 10 years, allowing a greater amount to be borrowed and repaid over a greater period of time. This, combined with a lowering of the interest rate to around 7.5% (with small deviation allowed for variable rate loans), was meant to improve uptake amongst Australia’s SMEs.

The original schemes received criticism for continuing to favour lending from deposit taking institutions, i.e. banks. One of the biggest barriers to performance was that only deposit taking institutions were able to benefit from cheaper funding from the Reserve Bank of Australia. Companies that specialised in just lending, who are traditionally much faster in processing business loan applications, have not been able to benefit from the cheaper sources of funding as they are largely funded on the secondary market. And whilst this wasn’t specifically addressed, there were a number of non-bank lenders participating in the SME Recovery Loan Scheme, which included:

• Fifo Capital Australia
• Shift (previously GetCapital)
• Liberty Finance
• Moneytech Finance

By applying with Lend, SMEs were matched with the most appropriate non-bank lender that was participating in the SME Recovery Loan Scheme. Despite the scheme ending, Lend can still match borrowers with the best financing fit for their business. It’s business as usual for the matchmaker – pairing businesses with lenders that specialise in unsecured business loans, lines of credit, equipment finance and much more.

Whilst Phase 2 of the SME Guarantee scheme increased the value of loans and the loan term, the SME Recovery Loan Scheme went a step further. The combined borrowing total of $5,000,000 particularly helped firms who were often caught in the middle of initiatives aimed to support small SMEs and the benefits a company can enjoy as a large multi-million dollar turnover business.

Key Terms of the SME Recovery Loan Scheme

Participating lenders are offering Government-backed loans under the SME Recovery Loan Scheme as follows:

• The Government guaranteed 80% of the loan amount (falling to 50% for loans written between 1 Jan 2022 – 30 June 2022).
• Lenders were allowed to offer borrowers a repayment holiday of up to 24 months (up from 6 months in prior schemes).
• Loans could be utilised for a significant range of business purposes, including to support investment. Loans could also be used to refinance any pre-existing debt of an eligible borrower, including those from prior SME Guarantee Schemes.
• Borrowers could access up to $5 million in total, when combined with the Phase 1 and Phase 2 loan limits.
• Loan terms up to 10 years, with an optional repayment holiday period.
• Loans could be either secured or unsecured (excluding residential property for secured loans).
• The interest rate on loans would be determined by lenders, but would also 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.
• Businesses with a turnover up to $250m were eligible to apply under the scheme.

It must be noted that whilst the Government was providing a guarantee for the loan, it was not a Government SME loan.  The decision on whether to extend credit and the ongoing management of the loan remained with the lender. However, with the increased support through the SME Recovery Loan Scheme, the Government expected lenders to look through the current economic conditions and make sensible lending decisions based on the usual performance of the business and on the basis the Government will provide a guarantee for 80% of the loan (which fell back down to 50% for loans issued after 1st Jan 2022).

In phase 1, the Government was encouraging lenders to provide facilities to SMEs that only have to be drawn if needed by the SME. So there was a preference for lending solutions such as a business line of credit.

Phase 2, whilst still encouraging these types of facilities, expanded to encourage a number of secured facilities too. The SME Recovery Loan Scheme has maintained this flexibility for both secured and unsecured loans. Secured loans can include fit out finance, asset finance or any secured loan which isn’t residentially secured.

Who Was Eligible for a Loan Under the Coronavirus SME Recovery Loan Scheme?

All active Australian businesses with a turnover of less than $250 million in the previous financial year, or expected turnover of less than $250 million in the current financial year were eligible to apply for a Government SME Recovery loan. This included individuals who were self-employed and not-for-profit businesses.

Loans were no longer needed to be used just to support current and upcoming cash flow requirements – business expansion was a perfectly valid reason to apply for a loan too. The only requirement was that loans, as you would expect, must be used for business purposes only. The Government instructed lenders to satisfy themselves of this by:

• Lending through a designated business product.
• Seeking a declaration from the borrower.
• Other means acceptable to the lender.

Reasons not valid for borrowing under the scheme, highlighted by the Australian Treasury, included:

• Purchasing residential property
• Purchasing financial products
• Borrowing to lend to an associated entity
• Lease, rent, hire or hire purchase existing assets that are more than half way into their effective life.

Lenders could offer any product deemed suitable for these purposes, with the exception of credit cards. Businesses were entitled to more than one loan under the SME Recovery Loan Scheme providing the total value of all facilities did not exceed $5,000,000. Businesses who benefited from phase 1 and phase 2 of the scheme could  apply through the SME Recovery Loan scheme as well.

Participating lenders were required to consider applications from new customers as well as their existing customer base.

Based on the data from Lend which processes SME Recovery Loan Scheme leads originated from us, we can say that the type of businesses looking for an SME recovery loan were diverse in size and industry. There were companies looking for SME recovery loans making millions in revenue each month, to ones generating below $500/m with a median average of $70,000/m in revenues. The only industry that stood out as having abnormally high levels of interest in the scheme was construction and building.

How Long is the Government SME Loan Guarantee Scheme Open?

The Government SME Recovery Loan Scheme has recently been extended to run until 30 June 2022, a six month extension on the original deadline of 31 December 2021. One crucial difference between loans issued prior to 31 December 2021 and after 1 January 2022 is that the government will lower the amount of the loan it guarantees from 80% to 50%. Lenders might therefore be more cautious for SME Recovery Loans issued in 2022.

Previous funding applications saw Phase 1 available between 23rd March 2020 – 30 September 2020 and Phase 2 between 1 October 2020 – 30 June 2021.

How Long is the Government SME Recovery Loan Scheme Open?

The Government SME Recovery Loan Scheme was extended to run until 30 June 2022, a six month extension on the original deadline of 31 December 2021. One crucial difference between loans issued prior to 31 December 2021 and after 1 January 2022 was that the government lowered the amount of the loan it guarantees from 80% to 50%. On reflection, lenders were certainly more cautious for SME Recovery Loans issued in 2022.

The scheme came to a completion on 30 June 2022.

Previous funding applications saw Phase 1 available between 23rd March 2020 – 30 September 2020 and Phase 2 between 1 October 2020 – 30 June 2021.

Which Lenders Were Participating in the SME Recovery Loan Scheme?

The Government was working with 18 participating lenders:

• ANZ
• Bank of Queensland
• Commonwealth Bank of Australia
• Fifo Capital Australia
• Shift (previously GetCapital)
• Judo Bank
• Liberty Finance
• Moneytech Finance
• National Australia Bank
• Regional Australia Bank
• Social Enterprise Finance Australia
• South West Credit Union Co-operative
• Suncorp-Metway
• The Mutual Bank
• TrailBlazer Finance
• Unity Bank
• Webster Dolilta Finance Ltd
• Westpac

This is a reduction on the 39 lenders participating in the previous SME Guarantee Scheme but still combined a blend of Banks, Co-operatives and Non-bank lenders.