SALON OWNERS ARE ELLIGBLE FOR POST-COVID LOANS

Home / HABA Blog / SALON OWNERS ARE ELLIGBLE FOR POST-COVID LOANS

Posted March 31, 2021

This blog post is general information only and should not be considered to be financial advice. HABA recommend that all salon owners seek independent financial advice on their business.

 

For those salon owners still struggling under the cloud of COVID-19, particularly those in Victoria, there is good news from the Federal Government today. Salon owners are eligible for the ‘SME Recovery Loan Scheme’.

The scheme is only open to those business owners who received the JobKeeper payment between 4 January 2021 and 28 March 2021, specifically small and medium sized businesses with up to $250 million turnover.

 

The Scheme is designed to support the economic recovery and to provide continued assistance to salon owners still on the Jobkeeper payment, which ended on the 28^th of March. The Scheme enhances lenders abilities to provide cheaper credit, allowing salon owners to access necessary funding to help them survive the business impacts of Coronavirus, and to invest in the future of their salons.

Is your salon eligible?

The scheme is only open to recipients of the JobKeeper payment between 4 January 2021 and 28 March 2021, specifically small and medium sized businesses with up to $250 million turnover. Both self‑employed individuals and non-profit businesses are eligible. Businesses that have accessed loans in Phase 1 and Phase 2 can also apply for loans under the scheme.

 

Key details

Participating lenders are offering guaranteed loans on the following terms under Phase 2:

• The Government guarantee will be 80% of the loan amount.
• Lenders are allowed to offer borrowers a repayment holiday of up to 24 months.
• Loans can be used for a broad range of business purposes, including to support investment. Loans may be used to refinance any pre-existing debt of an eligible borrower, including those from the SME Guarantee Scheme.
• Borrowers can access up to $5 million in total, in addition to the Phase 1 and Phase 2 loan limits.
• Loans are for terms of up to 10 years, with an optional repayment holiday period.
• Loans can be either unsecured or secured (excluding residential property).
• The interest rate on loans will be determined by lenders, but will be capped at around 7.5 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.

 

What can be borrowed?

Eligible salon owners can access up to $5 million total, in addition to the Phase 1 and Phase 2 loan limits already in place. The loan is for a term of up to 10 years, with the option of up to 24 months repayment holiday period. The loan can be either unsecured or secured (excluding residential property). Borrowers can access credit under the Scheme through any lenders approved to participate. Speak to a financial adviser or accountant about the best way to structure your loan to ensure that you can manage that debt as you take it on.

 

What can the loan be used for?

Loans can be used for a broad range of activities for salon owners, including to support investment and to finance the purchase of equipment.

Lenders can offer any product suitable to the borrower, with the exception of credit cards, charge cards, debit cards or business cards. Loans issued under the Scheme may take any other form of credit, provided the Scheme’s eligibility criteria are met.

Loans issued under the Scheme can be used to refinance existing loans or for a broad range of businesses purposes (including to support investment) but cannot be used to:

• purchase of residential property;
• purchase of financial products;
• lending to an associated entity; or
• lease, rent, hire, hire-purchase existing assets that are more than half way into their effective life.

 

What are the fees?

The interest rate on loans will be determined by lenders, but will be capped at around 7.5 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.

Lenders must disclose the effective loan interest rate to the borrower at the time of the loan agreement.

Fees will be determined by lenders but can only be charged to the extent they are consistent with fees on similar loans outside the Scheme. No fees are permitted to be applied to undrawn facilities.

 

How to apply

Loans backed by the Scheme will be available through participating commercial lenders. The decision on whether to extend credit, and management of the loan, will remain with the lender.

 

Advice

Before taking any loan on it is best to seek financial advice from an independent financial adviser to walk you through the process and to understand the terms and conditions of any loan and how it will effect your business in the future.

Those of you in Regional areas The Australian Government has committed more than $4.7 million to provide small regional businesses affected by COVID-19 with access to free and confidential financial counselling.

The funding would help eligible small businesses access the immediate advice and assistance they need to keep afloat and navigate the road to recovery.

Regional small businesses can register their interest by calling 1300 771 74.

 

Further advice or assistance

For further advice or assistance on this topic, or any workplace relations matter, please #AskHABA by calling the HABA Advice Line on 02 9221 9911, 8:30am – 5:30pm AEDT Monday to Friday.