The government’s revised SME loan guarantee scheme is too much of a short-term fix and needs to be backed up with other support measures to ensure a lasting post-pandemic small business recovery, a leading professional body argues.
In response to the Treasurer’s announcement last week that the terms of the A$40 billion SME Loan Guarantee Scheme will be revised from April 1, with the program re-branded as the SME Recovery Loan Scheme, CPA Australia said the loan scheme was “overly focused on business survival rather than business recovery”.
CPA Australia general manager external affairs, Jane Rennie, said: “Professional advice is needed to help businesses move from survival to recovery. Without advice, providing loans is like treating the symptoms without addressing the underlying condition.”
Rennie said the government should give small businesses financial incentives to access professional advice from their preferred provider.
This is a key point in CPA Australia’s Budget submission, which says: “Data from CPA Australia’s 2020/21 Asia Pacific Small Business Survey shows that, among Australian businesses that sought advice from an accountant in 2020, 26.9 per cent grew in that year, compared with 16.7 per cent that did not seek advice.”
Under the SME Recovery Loan Scheme, the government will increase the level of its guarantee from 50 per cent to 80 per cent.
The maximum loan size will increase from A$1 million to $5 million and the maximum eligible business turnover will rise from $50 million to $250 million. Maximum loan terms increase from five to 10 years.
Lenders will be allowed to offer borrowers a repayment holiday of up to 24 months. Eligible business will be able to use the scheme to refinance existing loans.
Interest rates will be set by lenders but will be capped at around 7.5 per cent. Loans can be unsecured or secured (although not secured by residential property).
The revised scheme is only open to recipients of JobKeeper payments between 4 January 2021 and 28 March 2021. Loans will be available from April 1 and must be approved prior to December 31.
The original scheme will remain open to eligible borrowers until 30 June. SMEs with a loan under the original scheme will be able to apply for a new loan under the new scheme.