COVID-19 Financial Assistance for Small and Medium Businesses in 2021

On 11 March 2021, the Federal Government announced the SME Recovery Loan Scheme (Recovery Loan Scheme), which will come into effect on 1 April 2021 and operate until 31 December 2021 and aims to assist eligible businesses to access financial support.

Similar to the Coronavirus SME Guarantee Scheme (Guarantee Scheme), the Recovery Loan Scheme will offer lenders a guarantee from the government on certain loans to allow distressed businesses to access cheaper credit at a lower interest rate as Job Keeper (and other COVID-19 related government assistance) ends throughout 2021.


The following businesses will be eligible to access the Recovery Loan Scheme:

  • Businesses that have accessed Job Keeper payments between 4 January 2021 and 28 March 2021;
  • Businesses with up to $250 million in turnover; and
  • All business structures, including self-employed individuals as well as non-profit businesses.

Moreover, businesses that have accessed a loan under the Guarantee Scheme are not excluded from accessing assistance under the Recovery Loan Scheme.

Features of the SME Recovery Loan Scheme

From 1 April 2021 until 31 December 2021, eligible businesses will be able to negotiate a loan from a Participating Lender under the following terms under the Recovery Loan Scheme:

  • The Government will guarantee 80% of the loan amount.
  • Lenders are allowed to offer borrowers a repayment holiday of up to 24 months.
  • Loans are for terms of up to 10 years, with an optional repayment holiday period.
  • Loans can be either unsecured or secured (excluding residential property).
  • The interest rate on loans will be determined by lenders but will be capped at around 7.5%.

Loans issued under the Recovery Loan Scheme may be used for a broad range of commercial purposes (including the refinance of existing loans even those from the Guarantee Scheme), but cannot be used for:

  • To purchase residential property (but can be used for purchasing non-residential real property);
  • To purchase financial products;
  • Lending to an associated entity; or
  • Leasing, renting, hiring or hire purchasing existing assets that are more than halfway into their effective life.

SME Recovery Loan Scheme v Coronavirus SME Guarantee Scheme

The Recovery Loan Scheme commences on 1 April 2021 and the Guarantee Scheme ends on 30 June 2021, so there will be a short overlap of access to both schemes. While ultimately the terms of the loan will be negotiated with the lender, it is important to be aware that the Recovery Loan Scheme offers slightly better terms for loan seekers than the Guarantee Scheme. These include:

  • Whereas the Guarantee scheme was only available to businesses with a turnover of $50 million, the Recovery Loan Scheme is available to businesses with a turnover of $250 million;
  • The interest rate under the Recovery Loan Scheme is capped at 7.5%, while the Guarantee Scheme is capped at 10%;
  • The loan limit for the Recovery Loan Scheme is up to $5 million (in addition to any loans under the Guarantee Scheme), while for the Guarantee Scheme it is up to $1 million; and
  • The Recovery Loan Scheme allows a repayment term of up to 10 years with a “repayment holiday” of up to 24 months, while the Guarantee scheme only allows a repayment term of 5 years.

It will be interesting to see the uptake in the new Recovery Loan Scheme and whether the banks will rely on it to finance businesses that they otherwise might not, or if it will mainly be used to support businesses that would already qualify for usual bank finance.

For more information about the SME Recovery Loan Scheme, or if you would like to discuss how we can assist your business post-COVID-19, please contact us or call (07) 3009 8444.


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