The Australian Government has announced they will be supporting up to $40 billion of lending to Small and Medium Enterprises (SME) through the Coronavirus SME Guarantee Scheme. This includes sole traders and not-for-profit businesses.
As such, the Government has essentially cut the ‘red-tape’ around lending obligations for lenders providing credit to existing small businesses. Therefore helping small and medium businesses get faster access to credit if they need it.
What is the Government providing?
Essentially, the Government is providing:
- Timely access to credit to help businesses get through the economic impacts of the Coronavirus
- Loans for up to three years, with an initial ‘repayment free’ period of six months
- Unsecured finance, borrowers do not need to provide an asset as security for the loan
- Loans for current and upcoming cash flow needs, which includes rent and staff expenses
How much can businesses borrow?
Businesses can borrow up to $250,000. Although many businesses will not need to borrow the full amount available, this works as a powerful lifeline for businesses that have have seen sales suffer as a result of COVID-19 shutdowns and the subsequent economic downturn.
Coronavirus SME Guarantee Scheme eligibility
Furthermore, the scheme is available to all active Australian businesses that had a turnover that is less than $50 million in the previous financial year or; have an expected turnover which is less than $50 million for the current financial year. Additionally, self employed and not-for-profit businesses are eligible for the Coronavirus SME Guarantee Scheme.
How to access the Scheme
Moreover, Commercial lenders will be supporting the Loans that are backed by the Coronavirus SME Guarantee Scheme. The Government is not directly lending to businesses. Therefore, if you and your business wants to take out a loan you should contact your financial institution or another participating lender. Additionally, the Government has provided a list of Coronavirus SME Guarantee Scheme participating lenders.
Some more important information
Additionally, the interest rates for Coronavirus SME Guarantee Scheme Loans are determined by your lender. Therefore, businesses should investigate multiple options before committing to a loan. Furthermore, if a borrower cannot meet repayments, lenders will be following the usual default processes.
Other Coronavirus support options for businesses
Finally, if you and your business do not want to take out a loan via the Coronavirus SME Guarantee Scheme, the Government has provided some other options to assist small businesses:
- JobKeeper Payments
- Temporary cash flow payments from the Government (up to $100, 000)
You find information about these schemes by checking out our COVID-19 resources page.
