The Federal Government is offering up to $128 million in zero-interest loans to help struggling residential aged care providers pay back resident accommodation bonds without risking financial ruin.
The Refundable Accommodation Deposit Support Loan Program, which runs from 1 July to 30 September, is providing interest-free secured loans to eligible residential aged care providers.
It comes in response to the significant impact of COVID-19 on these providers including low occupancy and higher than anticipated refunds of the lump sum Refundable Accommodation Deposits.
“The purpose of this funding is to assist eligible residential aged care providers to refund their RADs until 31 December 2021 without triggering an insolvency event,” the Department of Health said.
To be eligible, a provider’s liquidity must fall or expect to fall below the relevant liquidity threshold (10 to 30 per cent) according to its number of facilities and minimum liquidity requirements as a proportion RAD refunds at April 2020.
Providers must also be able to repay the funds loaned and unable to access sufficient commercial or alternative financing. State and territory government owned facilities are ineligible.
“This loan program will enable eligible providers to refund RADs on time. Providers will need to repay the loan in line with their agreement with the Department of Health,” the health department said.
Interested providers must fill out a detailed eligibility assessment about their financial situation and steps taken to source finance before they can be invited to apply for the RAD support loan.
StewartBrown senior partner Grant Corderoy said this was a positive and welcomed initiative.
“The government doesn’t want to see any providers fail through having to repay RADs in a time when they could be concerned and particularly over COVID with having to close facilities or not being able to get the occupancy levels to the same level,” Mr Corderoy told Australian Ageing Agenda.
It is difficult to estimate how many providers could benefit from this loan, but small or medium for-profits or regional providers are more likely to be eligible, he said.
Mr Corderoy said some not-for-profits received land from donors and therefore did not have to borrow money to purchase land or buildings.
“From a liquid point of view, [not-for-profits] have got better liquidity,” he said.
However, the criteria makes it tough for providers to be eligible and approved for the RAD loan, Mr Corderoy said.
“They’ve got to go through a difficult eligibility criteria including confirming that they’ve made applications to banks for finance, getting all their financial affairs in order, explaining their situation and also explaining their own liquidity,” he said.
“It’s going to be particularly difficult for providers who have got external borrowings now,” Mr Corderoy said.
The period providers have to apply is also very short, he said.
However, these difficulties to access the loans ensure the money is being used appropriately, Mr Corderoy said.