Article By: Tania Schiff, Lawyer Cappello Rowe Lawyers Sydney

As part of the Commonwealth Government’s economic response to the Coronavirus outbreak, the government has announced a scheme  (“the Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme”) whereby the government will guarantee 50% of new loans issued by participating lenders to small and medium enterprises (including sole traders and not for profit organisations). The Scheme will be available until 30 September2020, and will support up to $40 billion of lending to SMEs.

Eligibility for the Scheme

Access to the Scheme is available to active businesses with either:

• A turnover of less than $50 million in the previous financial year; or
• An expected turnover of less than $50 million in the current financial loan.

Terms of the New Loans

The terms of the new loans will include:

1. Maximum loan of $250,000 per borrower. This can be constituted in a number of facilities, but can only be made through one Lender;
2. The loans will be unsecured;
3. Loan term will be up to 3 years, with an initial 6 month repayment holiday. Interest will capitalise during the holiday period;
4. Loans must be used for business proposes only, and cannot be used to refinance any drawn facilities; and
5. Otherwise on terms, including interest rate, determined by the Lender.

Assessment of credit and other qualifying criteria will be undertaken by the participating lenders.

Participating Lenders

The list of participating lenders has not yet been announced, and we recommend that SME owners make initial enquiries of their existing financial institution as to whether they will be participating in the Scheme.

Cappello Rowe is available to advise you on any loan documents and to assist you in meeting the lender’s documentary requirements. Please don’t hesitate to contact us on 02 6962 3433 or via email at info@cappellorowe.com.au if you require any assistance.