The scheme allows SMEs to access up to $5 million
ANZ is preparing to ramp up lending following the expansion of the federal government’s SME recovery loan scheme, giving a boost to small and medium-sized businesses feeling the pinch from continued lockdowns.
In late August, the government announced changes to the eligibility criteria for the program, cutting requirements for SMEs to have either received JobKeeper during the March quarter or to have been affected by floods, The Australian reported.
The expansion of the program means businesses looking to expand – rather than just those fighting to survive – could now take advantage of current low rates, said Isaac Rankin, managing director for commercial and private banking at ANZ.
“Any business that’s been impacted by COVID can now apply for a loan under this scheme, and we see that as significant,” Rankin told The Australian. “That broadening of criteria is a good opportunity for businesses. A lot of businesses, which aren’t just fighting for survival but actually have good prospects, will now be able to access loans under the scheme, allowing them to rebound and grow.”
The expansion of the scheme would further economic recovery as New South Wales and Victoria draw closer to the end of lockdown, Rankin said.
“To have the rebound we’d like to see, we’ve got to have a few things present – businesses need to have access to funds and they also need confidence,” he said. “The future doesn’t have to be massively rosy, but businesses need to have some confidence and predictability, and they need to believe it’s not going to be worse in the future than it is now. That’s when we’ll start to see people invest, and I think this is one of the building blocks toward that.”
The take-up of the earlier, more restrictive program was low, Rankin told The Australian.
“There was a fairly small overlap of businesses that qualified and were confident to borrow more money,” he said. “We only want to lend to people who can afford it. It’s not a great idea to borrow money if you don’t have reasonable prospects of repayment. And that’s been the challenge – the narrowness of the scheme previously.”
The program, which has been in effect since April, is open to businesses with turnover of less than $250 million. It allows them to access up to $5 million over a 10-year term, with the government guaranteeing 80% of the loan. Lenders can offer borrowers repayment holidays of up to 24 months.
While lenders determine the interest rates for the loans, the rate is capped at about 7.5%, The Australian reported.
Businesses wishing to take advantage of the scheme must receive loan approval by Dec. 31, and the loan must be drawn down within 90 days.
