The Morrison Government will help businesses as they move into the recovery phase of the coronavirus crisis by extending the Coronavirus SME Guarantee Scheme which supports small and medium sized businesses (SMEs) to get access to the funding they need to adapt and innovate during the coronavirus crisis.

Under the existing Scheme, the Government is providing an unprecedented level of support to SMEs in partnership with 44 approved lenders by guaranteeing 50 per cent of new unsecured loans to SMEs. The Scheme has already seen more than 15,600 businesses accept loans worth $1.5 billion.

The next phase of the Coronavirus SME Guarantee Scheme will help businesses move out of hibernation, successfully adapt to the new COVID-safe economy and invest for the future.

Key changes to the Scheme include:

• Extending the purpose of loans able to be provided beyond working capital, such that a wider range of investment can be funded;
• Permitting secured lending (excluding commercial or residential property);
• Increasing the maximum loan size to $1 million (from $250,000) per borrower;
• Increasing the maximum loan term to five years (from three years); and
• Allowing lenders the discretion to offer a repayment holiday period.

The extended terms of the Scheme will enable lenders to continue supporting Australian small businesses when they need it most. The expanded Scheme will shift from providing access to working capital to helping businesses stay afloat during the crisis to now also enabling them to access more affordable and longer-term credit so that they can invest for their future.

The initial phase of the Scheme remains available for new loans issued by eligible lenders until 30 September 2020. The second phase of the Scheme will start on 1 October 2020 and will be available until 30 June 2021.

Ombudsman welcomes SME Loan Guarantee Scheme extension

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell says the government’s extension to the Coronavirus SME Guarantee Scheme will allow small businesses to access the working capital and investment funds they need.

The second phase of the scheme comes into effect from 1 October 2020, has been expanded to offer loans up to $1 million for a maximum term of five years.

Under the scheme, the government, in partnership with 44 approved lenders, will guarantee 50% of new, unsecured loans to SMEs. 

“We support this next phase of the Coronavirus SME Loan Guarantee Scheme, which aims to help businesses emerge from hibernation and adapt to COVID-safe protocols so they can continue to operate and ultimately grow,” Ms Carnell says.

“Crucially, the extended terms of the scheme provides small businesses more affordable credit over a longer period so they can invest in their future.”

Small businesses with a turnover of up to $50 million can apply for the loans between 1 October 2020 and 30 June 2021.

“These loans are unsecured and that means you don’t have to provide your home as security for the loan,” Ms Carnell says.

“The new loan will have a maximum term of 5 years – up from three.

“This time round, lenders have discretion to offer a loan repayment holiday and interest accrued over that period will be spread over the course of the loan. 

“While this is a good option for viable small businesses that have the capacity to grow, it is always a good idea to seek advice from a trusted, accredited financial advisor before entering into a loan.”