Support for immediate cash flow needs for SMEs

Coronavirus SME Guarantee Scheme

The Federal Government, Reserve Bank of Australia and the Australian Prudential Regulation Authority have taken coordinated action to support the flow of credit in the Australian economy, in particular for small and medium enterprises (SMEs). 

Under the Coronavirus SME Guarantee Scheme, the Government is providing a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital. This has enhanced lenders’ willingness and ability to provide credit, which will result in SMEs being able to access additional funding to help support them through the upcoming months.  

Eligible lenders are currently offering guaranteed loans up to 30 September 2020 on the following terms:

- SMEs, including sole traders and not-for-profits, with a turnover of up to $50 million
- Maximum total size of loans of $250,000 per borrower.
- Loans will be up for to three years, with an initial six month repayment holiday.
- Unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

As the economy continues to open up, the Government will extend the Scheme to help businesses come out of hibernation and recover. The extended Scheme will continue to support lenders’ ability to provide credit and ensure that SMEs benefit through lower interest rates. 

From 1 October 2020, eligible lenders will be able to offer loans during this next phase on the same terms as the current Scheme with the following enhancements:

- Loans can be used for a broader range of business purposes, including to support investment.
- The maximum size of the loans will be increased to $1 million per borrower.
- Loans can be up to 5 years rather than 3 years and whether there will be a six month repayment holiday will be at the discretion of the lender.
- A loan can be either unsecured or secured (excluding commercial or residential property).

These loans will be available for loans made until 30 June 2021. 

Loans will continue to be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.

Access to credit
The Government has provided an exemption from responsible lending obligations for lenders providing credit to existing small business customers. This exemption is for six months, and applies to any credit for business purposes, including new credit, credit limit increases and credit variations and restructures.  

Responsible lending obligations do not currently apply to lending which is predominantly for a business purpose, but it can take time and effort for lenders to be satisfied that the money borrowed meets this test. A temporary exemption from responsible lending obligations, will help small businesses get access to credit quickly and efficiently.   

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