Third time is a charm for Frydenberg SME turnaround loan program

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This Friday, the third round of the SME Recovery Loan Scheme will go into effect, providing billions of government-backed funds to small businesses.

The revamped program was announced in August, with slightly cheaper eligibility criteria than in previous versions.

As part of the overhaul, the government removed the requirement for small businesses to have received JobKeeper in the March 2021 quarter, or to have been a business affected by the flooding.

Businesses with revenues of less than $ 250 million will be able to access loans of up to $ 5 million over a term of up to 10 years, secured or unsecured.

Lenders can offer borrowers up to two years of repayment leave, and the loans can be used to refinance other debts.

In total, there are 18 participating lenders, including major banks, with the full list below.

Joseph Healy, CEO of Judo Bank – one of the participants in the program – welcomed the expansion.

“The decision to extend this program to businesses affected by the pandemic is welcomed by judo and the SME sector, as it will allow eligible businesses to access vital credit, recover and invest for the future. “said Mr. Healy.

SMEs are slow to pull off despite a series of financing measures

In 2020, the government allocated $ 40 billion for the program, but so far only $ 6.2 billion in loans to 77,500 companies have been approved.

However, JobKeeper ran simultaneously in 2020, potentially reducing the need for significant funding.

A similar trend was seen in the Reserve Bank’s Term Finance Facility (TFF), which provided billions of dollars in low-cost financing to businesses, and showed that businesses were initially timid to access funds. that were allocated to them.

“Overall, business lending was little changed, with lending from a number of banks declining. Econometric estimates by Bank staff suggest that there was little observable effect of the incentive. more important to lending to SMEs compared to lending to large companies, ”an RBA assessment of the TFF mentioned.

“However, it is difficult to control other important factors that influenced the demand for business credit, such as the fact that SMEs were disproportionately located in sectors hit hardest by the pandemic, negatively affecting both supply and demand for credit.

“In addition, SMEs have received significant government support, through initiatives such as JobKeeper, which has reduced the need for credit.”

The RBA assessment also showed that since the end of February 2020, interest rates on variable loans to SMEs and large corporations had fallen by 95 basis points.

Fixed rates had fallen by 60 to 80 basis points on average.

Judo’s 2021 SME Insights report from February, which surveyed 1,753 SMEs, found that 39.9% of companies planned to use business loans for COVID provisions, including to close the gap between qualifications for JobKeeper.

In total, small businesses had a total required funding sinkhole of $ 94.3 billion in 2020, up $ 4.6 billion from 2019.

About half of the companies surveyed had applied for funding in the past 12 months, for an average of $ 1.2 million.

Mr Healy also said that one in four companies surveyed had been prevented from accessing new funding.

“Despite strong demand, the fact that one in four SMEs have been prevented from accessing new financing is incredibly disappointing given the enormous support and stimulus made available to lenders by Canberra,” he said. he declared.

Lenders participating in the SME recovery loan program

  1. ANZ
  2. Commonwealth of Australia Bank
  3. National Bank of Australia
  4. Westpac
  5. Queensland Bank
  6. Fifo Capital Australia
  7. Obtain capital
  8. Judo bank
  9. Freedom Finance
  10. Moneytech Finance
  11. Regional Bank of Australia
  12. Social business finance Australia
  13. Southwestern Credit Union Cooperative
  14. Suncorp-Metway
  15. Mutual Bank
  16. Finance TrailBlazer
  17. Unity Bank
  18. Webster Dolilta Finance SA

Earlier in September, the Federal Government’s Australian Business Securitization Fund also injected $ 87.5 million into GetCapital, in addition to the $ 46 million it received in November 2020 through the ‘Structured Financial Support Fund. “.


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Rates based on a $ 30,000 loan for a five-year term. * Disclaimer: This comparison rate is only true for this example and may not include all fees and charges. Different terms, fees, or other loan amounts may result in a different comparison rate. Rates are correct as of September 28, 2021. See disclaimer.


Photo – @JoshFrydenberg Twitter


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