The Government’s SME Recovery Loan Scheme explained
Tags: loan, recoveryloanscheme
Published: 2022-02-01 18:42:52

It’s often said that small to medium-sized businesses (or SMEs as they are known) are the backbone of the Australian economy. That’s because 97% of businesses in Australia are SMEs. The Australian Bureau of Statistics defines an SME as any business with less than 20 staff, including sole traders who don’t employ any staff at all.

The importance of SMEs to Australia’s post-COVID-19 economic recovery is highlighted by the SME Recovery Loan Scheme.  Read on to find out everything you need to know about the Scheme, including answers to FAQs.

## What is the SME Recovery Loan Scheme?

The SME Recovery Loan Scheme is an extension of the SME Loan Guarantee Scheme, which came into effect on 1 April 2021 and was intended to run until December 31, 2021.

The SME Recovery Loan Scheme has been extended to June 30, 2022. It will enable eligible businesses with an annual turnover of less than $250 million (including not-for-profit organisations) to access partially government-guaranteed loans of up to $5 million for terms of up to ten years. The federal government will provide a guarantee for 50% of the loan amount, which reduces lender risk.

SMEs who have already taken out loans under the SME Loan Guarantee Scheme in 2021 received a government guarantee of 80% of the loan amount. This guarantee percentage doesn’t impact the cost of the finance; it purely helps reduce the risk for the lender, making approval more likely for eligible borrowers.

## What can SME Recovery Loans be used for?

SME Recovery Loans can be used for a wide range of purposes, including:

- Investment (such as buying another business or commercial property).
- Refinancing of existing debt.
- Covering overheads.
- Business acquisition.

However, SME Recovery Loans cannot be used to buy:

- Residential property.
- Financial products.
- Second-hand assets that are more than halfway into their expected useful life.

## Do SME Recovery Loans have to be secured?

No, they can be secured or unsecured loans. At Earlypay, we are offering our Invoice-Backed Line of Credit which is secured by your customers’ unpaid invoices. 

It’s important to note that you cannot use residential property as security for an SME Recovery Loan. This restriction led to a lower take-up rate than initially expected for the SME Loan Guarantee Scheme in 2021. It remains to be seen if it will similarly affect the SME Recovery Loan Scheme in the first six months of 2022.

## What is the SME Recovery Loan interest rate?

Interest rates are set by participating lenders, but are capped at a maximum of 7.5% unless market rates increase significantly over the loan’s term.

Contact us on 1300 760 205 to find out more.

## How do you apply for an SME Recovery Loan?

You can apply for an SME Recovery Loan through any government-approved participating lenders. We are proud to be a participating partner! Click here for more info on how to get started.

## Alternatives to the SME Recovery Loan Scheme

If your business needs secured finance and you don’t meet the requirements of the SME Loan Recovery Scheme, your options include:

- asset finance,
- trade finance, and
- invoice finance.
- The bottom line

It’s important to get the finance you need to both survive and thrive in a post-COVID-19 business environment. We are proud to participate in the SME Recovery Loan Scheme. To learn more about our SME Recovery loan, please visit our SME Recovery Loan Scheme page or contact us on 1300 760 205.


_Originally posted here:_ [https://www.earlypay.com.au/blog/the-government-s-sme-recovery-loans-explained](https://www.earlypay.com.au/blog/the-government-s-sme-recovery-loans-explained)