This article was first published on 12 April 2021 and updated on 28 January 2022 to include changes following the loan scheme expansion. 


The federal government has once again extended the SME Recovery Loan Scheme for small and medium-sized businesses that are adversely impacted by the COVID-19 pandemic. 

The scheme expansion is in effect from 1 January 2022 until 30 June 2022.

If you’re looking to expand your access to finance and support the recovery and growth of your business, this loan scheme may be a good option for you.


What is the SME Recovery Loan Scheme?

The SME Recovery Loan Scheme aims to support the growth and recovery of eligible small and medium-sized businesses that have been impacted by the COVID-19 pandemic. Under this scheme, eligible firms can take out a loan of up to $5 million from qualified lenders and use it to maintain and grow their business.

In its earlier version last year, eligible flood-impacted businesses and JobKeeper recipients can also apply for this program but are no longer included in the 2022 extension.


What’s in it for you?

This loan scheme offers the following features:

  • Government guarantee of up to 50% of the loan amount. (Under the 2021 scheme, the guaranteed percentage is 80%).
  • Up to $5 million loanable amount, including the Phase 1 and Phase 2 loan limits.
  • You can use the loans for various business purposes such as support investment.
  • You can use the loan to refinance pre-existing debt.
  • Its terms are up to 10 years, with an optional repayment holiday period.
  • Lenders can offer you a repayment holiday of up to 24 months or two years.
  • You can take out secured or unsecured loans (excluding residential property).
  • Lenders will determine the interest rates. However, it should be capped at around 7.5% with some flexibility for interest rates on variable rate loans to increase in case market interest rates grow over time.

Keep in mind that you are responsible for repaying your loans under this scheme, regardless of the amount. As a standard operating procedure (SOP), your lender will follow the typical processes in handling unmet repayments.


How can you apply?

Unlike other relief programs and business grants, the SME Recovery Loan Scheme is not directly administered by the government.

Instead, you will need to file your application to any of the participating lenders. As of this writing, the government has already approved 19 lenders to participate in the loan program. Other banks and financial institutions are also waiting for their approval to participate.

The treasury department also recommends shopping around and comparing loan offers before applying for one.

When you apply, take note that the approval, management, and extension of your loan will remain at the lender’s discretion. The exact process and requirements also vary depending on the lender of your choice.

For the updated list of approved lenders, check out the website of the treasury department.


Are you eligible for this scheme?

You must meet the following criteria to qualify for the SME Recovery Loan Scheme:

  • An SME, self-employed individual, sole trader, or not-for-profit organisation with up to $250 million annual turnover.
  • Been adversely economically impacted by the pandemic
  • Have a registered ABN 

You can still apply for this expansion scheme even if you’ve already accessed loans in Phase 1 and Phase 2.


Where can you use the loan?

You can use the loans issued under this scheme for any business activities, including loan refinancing and support investment. 

However, you cannot use it for the following purposes:

  • Purchasing of residential property
  • Buying of financial products
  • Lending to any affiliated entity
  • Leasing, renting, hiring, and purchasing of existing assets that are more than halfway into their effective life


Make the right decisions

Taking a loan is a huge responsibility. If you’re still wondering if the expanded loan scheme is worth the shot — and risks — ABJ Solutions is here to help. We will help you assess the current financial health of your business and how this loan can be beneficial to you. Our team of accountants can also assist you to prepare relevant business records to increase your chances of securing the loan.

Get in touch with us today so that we can help guide you through these challenging times.