Extension of SME loan guarantee program to support small business recovery

So much small enterprises struggling to find their place in an economy secure against COVID, the federal government has stepped in with another lifeline: an expansion of its SME loan guarantee program.

Under the existing scheme, the government guarantees 50% of business loans issued by participating lenders to small and medium-sized enterprises (SMEs). This guarantee initially covered three-year unsecured loans up to $ 250,000 and was scheduled to end on September 30, 2020.

But the latest move means SMEs will soon be able to access much larger loans of up to $ 1 million through the program and repay them over a longer period of five years.

This second phase will run from October 1, 2020 to June 30, 2021. In other words, it is expected to start one day after the expiration of a number of government stimulus programs (including increased liquidity and support for apprentices’ salaries).

Phase two will also include secured loans (unless the collateral is commercial or residential property) and will apply to a wider range of funding objectives beyond working capital.

Treasurer Josh Frydenberg said the expansion reflects a shift in the government’s focus from supporting the short-term survival of businesses to supporting their longer-term investments as they emerge from “hibernation.” Induced by COVID.

This comes after recent research found that more than a quarter of SMEs see the lack of available finance as their biggest obstacle to innovation and growing for the remainder of 2020.

A total of 41 lenders currently participating in the program, including the Big Four Banks (ANZ, Commonwealth Bank, NAB, Westpac) as well as non-bank lenders such as GetCapital, OnDeck, Prospa and Spotcap.

Adoption so far has been lower than expected, with 15,600 companies securing loans worth $ 1.5 billion, up from $ 40 billion expected.

But CommBank chief executive Matt Comyn said the expanded program would play an important role in helping small businesses recover in the months to come.

“It is clear from the challenges we are currently facing in Victoria that the recovery will not be as smooth or rapid as it first thought, which is why it is essential that we find creative solutions that offer small businesses. especially different ways of playing. their role in helping the country and Australians get back on their feet, ”he said.

“[The] raising the available amount to $ 1 million and extending the loan to five years will allow SMEs … to make the investments needed to get people back to work, create new jobs and build confidence in the economy.

NAB Managing Director Ross McEwan also welcomed the expansion. He said the changes would make the program “available to more businesses, longer, to help them rebuild – and support Australia’s recovery.”

Are you looking for additional financing to pay your staff or buy new equipment? Start with a few offers below, or move on to our business loan comparison table for even more options.