It’s been a challenging year for Australian business owners. But with restrictions easing, now’s the time to seize on opportunities and bounce back.
There is a range of finance solutions to help businesses get moving again. The government has provided some financial assistance, and lenders have announced new support.
Many of these options and schemes are closing at the end of the year. So you need to move quickly to secure the funding you need.
We’ve created a breakdown of financial support available to help you understand your options and plan the next steps for your business.
Keep reading to learn more about the 7 types of COVID bounce back loans and finance solutions.
Government SME Recovery Loan Scheme
The Government SME Recovery Loan Scheme is a program to help businesses affected by the pandemic access funding. Participating lenders are offering a range of loans, with the Australian government guaranteeing 80% of the loan amount.
The government guarantee helps small and medium-sized businesses to access credit by reducing the risk for lenders. Companies can access loans of up to $5 million under the scheme.
Your business must have a turnover of less than $250 million and have received JobKeeper payments in the March quarter of 2021 to qualify. You may also be eligible if your business was affected by the floods in March 2021.
You can find the full eligibility criteria on the Government Business website.
If your business accessed government-backed loans in Phase 1 and Phase 2, you can still apply for loans under the current scheme.
Some lenders are providing repayment holidays for 24 months to help businesses recover. But interest will continue to accrue during this period, and you will have a larger amount to repay after the initial repayment holiday.
At the time of writing this article, the Government SME Recovery Loan Scheme is due to close on the 31st Dec 2021.
ScotPac SME Bounce Back Fund
The ScotPac SME Bounce Back Fund is a working capital financing scheme to help businesses recover and generate cash inflows faster.
Businesses can access up to $1 million through Trade Finance and Invoice Finance facilities. In addition, the first three months of the funding are interest-free.
The fund is designed to help companies increase liquidity and invest during the vital first few months of recovery.
The cost of the interest-free period is borne by ScotPac and not deferred and compounded like many of the repayment holidays offered by banks participating in the Government SME Recovery Loan Scheme.
The interest is waived. You do not need to repay it at a later date.
The SME Bounce Back Fund is available to both existing and new ScotPac customers.
Invoice Finance is a way to get fast funding by releasing the capital tied up in your outstanding invoices. It’s a line of credit secured by your accounts receivables.
When you raise an invoice, you can access up to 95% of the invoice value as a cash advance instead of waiting to receive payment from your customer. Then, when your customer pays, you get the remaining balance of the invoice less fees.
You can get interest-free invoice financing for three months with the ScotPac SME Bounce Back Fund.
According to the Australian Government Productivity Commission’s latest research paper, 47% of small businesses apply for finance to help maintain cash flow.
Invoice Finance can be an effective way to support working capital and help your business keep up with customer demand. It’s a flexible type of funding that can be tailored to your cash flow needs.
You can choose from a come and go Selective Invoice Finance facility with no minimum term or full-service invoice factoring with collections and account management included. There’s also the option of confidential financing with invoice discounting.
Read our guide on how Invoice Finance can help small businesses to see if you could benefit from this type of financing.
Trade Finance is a funding solution designed to help businesses cover the cost of purchasing raw materials, inventory, and stock. You can take on new orders and avoid cash flow gaps with a line of credit to pay your domestic and overseas suppliers.
With the ScotPac SME Bounce Back Fund, you can access interest-free credit for the first three months.
Trade Finance helps bridge the gap between paying your suppliers and waiting for your customers to pay you. It can also provide the extra financial backing you need to negotiate early payment and bulk buying discounts with your suppliers.
When combined with an Invoice Finance facility, you can use Trade Finance to cover cash flow gaps of up to 180 days. You can get your business back up to speed and take advantage of new opportunities as the economy recovers.
Check out our guide to learn more about how Trade Finance works.
Equipment Finance helps businesses get the machinery, vehicles, and equipment they need to take on opportunities and grow. Instead of covering large payments upfront, you can spread the investment cost over a more extended period.
You can start using the equipment immediately and make monthly repayments over a period of one to three years. At the end of the term, you can buy the equipment outright, return it, or replace it with new equipment.
Equipment Finance can be a cost-effective way to get the tools and machinery you need. In many cases, the repayments are also tax-deductible and can reduce your ATO bill.
Read our customer story to see how Equipment Finance helped NSW transport company Computertrans grow into one of the largest freight specialists in Australia.
Business Credit Cards
Business credit cards can be a good way to cover incidental purchases. You can use a credit card to pay for day-to-day business expenses as you would with a personal credit card. You can spend up to your credit limit and will need to make regular repayments on the principal and interest.
While credit cards provide extra liquidity, they are one of the most expensive ways to access finance. If you don’t clear the card balance each month, interest and fees can quickly mount up.
If you need to cover a minor expenditure for a short period, a business credit card can be a good funding solution. However, for more significant purchases and working capital support, there are more affordable options available.
Property-secured loans can provide a large lump sum to help your business. The amount you can borrow is determined by your business circumstances and the assets you can use as collateral.
Once you receive funding, you pay back the lender over a set period. Because of the property security, interest rates are generally lower than other types of financing.
With the Government SME Recovery Loan Scheme, you may also be able to access an initial repayment holiday. However, you will still be charged interest on the entire loan amount, which could increase the total amount you pay for the loan.
Qualifying for a property-secured loan from a bank can be challenging for many businesses. You’ll need to have enough equity in your home or business property, a strong credit rating, and established trading history.
But there are more accessible property-secured loans like ScotPac’s Home Loans for Business Owners. The application process is much easier and you can get conditional approval in as little as 48 hours. You can also tailor the repayment terms to meet your cash flow needs.
Funding to Help You Get Back to Business
With government-backed schemes and new funding solutions, there are plenty of options to support your business recovery.
It’s important to choose a solution that works for your business both now and in the future. If you need some help understanding your options, reach out to our team of friendly business finance experts.
ScotPac has been a trusted partner for Australian SMEs for over 30 years. Our SME Bounce Back Fund is designed to help businesses get the funding they need to grow and succeed.
Fill out a simple online enquiry form or give us a call on the number below.