The Australian Government has established the Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme to provide $40 billion in support for lending to SMEs (including sole traders and not-for-profits).   

Under the Scheme, the Government will provide a guarantee of 50 per cent to participating small and medium enterprise (SME) lenders for new unsecured loans to be used for working capital. 

Loans backed by the Scheme will be made available through participating bank and non-bank lenders. The Government is not directly participating in the lending process.

Key notes:

• Remember these are loans, not grants.  
• There is still an application process.  
• Interest is still charged and repayments will be required after the 6 month repayment holiday.

Lending to Small Businesses is based on a risk (or credit) assessment of each applicant/ small business. This assessment typically results in a lending decision and, if approved, an interest rate to be paid.  By introducing the SME Guarantee Scheme the Australian Government is helping reduce that risk by guaranteeing 50% for the Lender/ Bank.  

Reducing the risk borne by the Lenders helps in two ways:

1. By enabling lenders to offer loans to businesses that they may otherwise not have leant money to.

2. Enabling lenders to potentially offer more competitive interest rates than on their standard loans.

Loan product information and interest rates will vary by Lender.  

Some consistent features across all participating lenders include:

• Maximum total size of loans is $250k per borrower

• Term of up to 3 years

• Initial six month repayment holiday

• Loans are unsecured, meaning that SMEs will not have to provide an asset as security for the loan.

All active Australian businesses with turnover of less than $50 million in the previous year who have been impacted by COVID-10.  This includes sole traders and not-for-profits.

The loan cannot be used to refinance existing loans.  A credit assessment will be undertaken.  The decision on whether to offer the loan is subject to the individual Lender.

ANZ, CBA, NAB and WBC are all participating.

A number of our Integrated Lending Partners are also participating:

• Moula
• Prospa
• SpotCap
• GetCapital
• Other lenders TBC

The full list is available via here.

Participating lenders are open to receiving applications or expressions of interest now.  

Exact launch dates will vary from lender to lender.

Application closing dates may vary by lender although new loans are made by participating lenders are only available until 30th September.

The application process for each lender will vary so check out their site for details.