ScotPac to waive first three months of interest on loans to help SMEs ‘bounce back’

SME lender ScotPac will completely waive the first three months’ of interest on loans to small businesses offered through a new dedicated working capital fund that is launching today. 

The $100 million ScotPac SME Bounce Back Fund will offer up to 2000 new and existing customers debtor or trade finance facilities of between $50,000 and $1 million, for a minimum 12 months, with no interest to be paid on the loan amount for the first three months. 

After that time, the interest rate will vary depending on the business’ credit risk, the strength of the business and the size of the loan.

ScotPac chief executive Jon Sutton tells SmartCompany the private equity-owned lender was motivated to launch the fund to help more Australian and New Zealand SMEs “get back on their feet” as COVID-19 restrictions are eased across the country. 

“Businesses have no doubt been supported during the pandemic by the various state and federal government initiatives … but a lot of those support mechanisms are now winding back,” he says. 

“Businesses need working capital; they need dollars in their hands to manufacture, to sell goods.”

Sutton says the SMEs and brokers that ScotPac is speaking to are positive about the economic recovery, however, businesses are looking for ways to reinvest back into their businesses. 

In particular, ScotPac is seeing increased demand for finance from SMEs in sectors such as logistics and last mile delivery, where businesses that have grown during the pandemic are now needing working capital to keep up with their expansion, as well as from firms in manufacturing and labour hire. 

The interest-free component of the ScotPac loans is designed to help small businesses navigate those initial months of either re-opening or expanding a business, when there is often a wait before revenue starts rolling in. 

On a loan of $1 million, for example, Sutton says a business could expect to save $17,000. Such a saving represents “genuine assistance to SMEs who are coming out of lockdown and whose businesses are moving quickly”, he says. 

Sutton says this puts the new fund in contrast to the federal government’s SME loan guarantee scheme and the expanded SME recovery scheme, which is due to finish at the end of this year. ScotPac did not participate in either scheme. 

The SME Bounce Back Fund will operate on a ‘first come’ basis until April 2022 and ScotPac expects to lend up to 2000 businesses. 

When ScotPac delisted from the Australian Securities Exchange in 2018 it had approximately 1600 customers and while he doesn’t reveal the current figure, Sutton says it has grown over the past 18 months as the lender has expanded its range of products.

While SME finance has traditionally been the domain of the banks, the number of alternative lenders has grown significantly in recent years, a trend noted by the Productivity Commission in its recent review of the sector. 

More fintech lenders have entered the space, including the likes of Zip Co, while existing operators are utilising new ways to offer capital to business owners.

However in its report, the Commission also highlighted a persistent “gap” in lending for SMEs looking for unsecured finance between $250,000 and $5 million, with few lenders are currently offering these loans.

Scottish Pacific has operated in the small business lending space for 30 years and Sutton says the new fund is “squarely aimed at supporting businesses that find it difficult to get finance”. 

“SMEs are the lifeblood of our economy,” he says. 

“The fund will give immediate working capital to these SMEs so they can get on with what they do best.”