The existing loan guarantee scheme rules meant that only $1.5 billion out of a planned $40 billion worth of loans were guaranteed.
Thankfully the rules have now been ‘enhanced’ with the following changes hoping to see more business able to access the funding.
- The scheme has been extended to 30 June 2021, with the new eligibility rules coming into place from 1 October.
- Loans can be used for a broader range of business purposes beyond funding working capital, including “to support investment in a period of economic recovery.” Further details of this eligibility requirement are yet to be released.
- The maximum loan size will be increased to $1 million per borrower.
- Loans can be up to 5 years rather than 3 years and whether there will be a six month repayment holiday will be at the discretion of the lender.
- A loan can be either unsecured or secured (excluding commercial or residential property). Previously only unsecured lending was allowed under the scheme.
While JobKeeper is stealing all the headlines, it is merely life support for businesses that were significantly impacted by the pandemic shutdown. This loan scheme could be a game changer for SMEs that are in a position to access it. With the extension to 5 years, and the as yet unclarified ‘broader range of business purposes’ this scheme could be exactly what small businesses have been crying out for – access to fairly priced credit in order to grow their business.
Ultimately the banks and financial institutions are still administering this scheme and remain responsible for their own lending criteria. I think this opportunity is too good to miss so businesses should ensure their financial affairs are in order with figures reconciled and up to date, and need I say cash income reported correctly, as well as some thought put toward growth and business planning in order to take advantage of this scheme.