Coronavirus SME Guarantee Scheme

Encouraging banks to provide loans to SMEs.

For the next 6 months the Government has offered to guarantee 50% of loan amounts offered to small and medium sized businesses with an annual turnover of less than $50 million. To receive the guarantee, banks do need to follow certain conditions including an initial 6 month payment holiday and no asset security from the borrower.

The Government will guarantee 50% of new unsecured loans offered to SMEs for use as working capital. This will enhance lenders willingness to provide credit, supporting the ability of SMEs to continue operation over the coming months through access to additional funding.

SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • Maximum total size of loans of $250,000 per borrower.
  • The loans will be up to three years, with an initial six month repayment holiday.
  • The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will 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.

Further to this, the Government will encourage lenders to provide facilities to SMEs that can be drawn only as needed. The SME will only incur interest on the amount they draw on. If they do not draw from the facility, they will incur no interest but they will have the flexibility to draw funds in future.

Eligibility

Any small to medium business with an annual turnover of less than $50 million will be eligible for the scheme.

Timing
The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

 How to Apply

If you are interest in securing a loan under the scheme you should approach your financial institution.

Links to Government Resources

FAQs

The Australian Government has enacted a number of incentives to encourage banks to provide unsecured loans, credit increases and other assistance to small and medium businesses. This should improve the likelihood and speed of loan approvals for use as working capital.

The government has enacted a number of initiatives to encourage banks to reduce interest rates during the pandemic by providing access to a $90 billion fund at a fixed interest rate of 0.25%. Banks have further been encouraged to support current loan holders through repayment holidays and increased credit allowances.

The Government has committed to guaranteeing loans for small to medium businesses with a turnover of less than $50 million. Terms for the offered loans include:

  • Maximum amount of $250,000 per borrower
  • Up to 3 year term with an initial 6 month repayment holiday
  • Loans will be unsecured – borrowers will not have to provide assets for security

Loans will still be subject to lenders criteria assessment with the expectation that current economic conditions are taken into account.

Coronavirus SME Guarantee Scheme - Frequently Asked Questions(FAQ)

Can I get loan to support my business during the Coronavirus pandemic?

The Australian Government has enacted a number of incentives to encourage banks to provide unsecured loans, credit increases and other assistance to small and medium businesses. This should improve the likelihood and speed of loan approvals for use as working capital.

Will banks increase interest on repayments during the pandemic?

The government has enacted a number of initiatives to encourage banks to reduce interest rates during the pandemic by providing access to a $90 billion fund at a fixed interest rate of 0.25%. Banks have further been encouraged to support current loan holders through repayment holidays and increased credit allowances.

What loan conditions can I expect during the Coronavirus pandemic?

The Government has committed to guaranteeing loans for small to medium businesses with a turnover of less than $50 million. Terms for the offered loans include:

  • Maximum amount of $250,000 per borrower
  • Up to 3 year term with an initial 6 month repayment holiday
  • Loans will be unsecured – borrowers will not have to provide assets for security

Loans will still be subject to lenders criteria assessment with the expectation that current economic conditions are taken into account.

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