Business Finance Guarantee Scheme

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Recent changes to the Business Finance Guarantee Scheme aim to better support small and medium-sized businesses during the COVID-19 recovery.

Announcements made on 20 August 2020 highlight plans to simplify and expand the scheme, providing wider eligibility criteria and higher loans. With only $150 million having been used of the scheme’s $5 billion, significant changes have been made to boost growth and offer wider economic support.

The Government is continuing to take on 80% of the loan default risk, although borrowers are reminded that they are still liable to pay this debt back with interest, and recovery processes will be implemented if required. Lenders are also entitled to make their own lending decisions and enforce their own lending requirements. Eligible businesses can now apply for new loans, the extension of an existing loan or a revolving credit facility with lending limits capped at $5 million for banks and $3 million for non-banks for a five-year term. This increase in loan values is also bolstered through lending now being offered to businesses with an annual revenue of up to $200 million for banks and $50 million for non-bank lenders.

Notably, the loans are required to be used as credit for cashflow, capital assets and projects which relate to the impacts of COVID-19. When approaching your bank, the information they require will differ depending on the bank and your individual circumstances. You will be asked to provide your latest business financial statements; a copy of your most recent tax return; a 12-month cash flow forecast for the business; and a personal statement of position. The team at Walker Davey Searells can assist you in gathering and putting this information together. We can also work with you to help create a plan for the future of your business and the serviceability of a loan. Given the changes made to this scheme and caveats on how the loan can be used, we recommend first contacting your bank or financial institution to check your eligibility.