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Coronavirus SME Guarantee Scheme


The Coronavirus SME Guarantee Scheme will provide support for these businesses. Under the Scheme, the Government will provide a guarantee of 50 per cent to small and medium enterprise (SME) lenders for new unsecured loans to be used for working capital. This will enhance these lenders’ willingness and ability to provide credit, which will result in SMEs being able to access additional funding to help support them through the upcoming monthsSMEs with a turnover of up to $50 million will be eligible to receive these loans

Eligible lenders are currently offering guaranteed loans up to 30 September 2020 on the following terms: 

  • Maximum total size of loans of $250,000 per borrower.
  • The loans will be up to 3 years, with an initial 6 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.

From 1 October 2020, eligible lenders will be able to offer loans during the next phase on the same terms as the current Scheme with the following enhancements: 

  • Loans can be used for a broader range of business purposes, including to support investment in a period of economic recovery.
  • The maximum loan size will be increased to $1 million per borrower.
  • Loans can be up to 5 years rather than 3 years and whether there will be a six month repayment holiday will be at the discretion of the lender.
  • A loan can be either unsecured or secured (excluding commercial or residential property). 

Loans will continue to 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. The decision on whether to extend credit, and management of the loan, will remain with the lender. 

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.

As part of the loan products available, the Government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME. This will mean that the SME will only incur interest on the amount they draw down.  If they do not draw down any funds from the facility, no interest will be charged, but they will retain the flexibility to draw down in the future should they need to.

Timing

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

How to apply

If you're interested in the Coronavirus SME Guarantee Scheme you should approach your financial institution for more information. The Government is working with banks and other lenders to ensure loans are available as soon as possible.

Find out more about the Coronavirus SME Guarantee Scheme

Quick and efficient access to credit for small businesses


The Government is providing an exemption from responsible lending obligations for lenders providing credit to existing small business customers. This exemption is for 6 months, and applies to any credit for business purposes, including:

  • new credit
  • credit limit increases
  • credit variations and restructures

Responsible lending obligations do not currently apply to lending which is predominantly for a business purpose, but it can take time and effort for lenders to be satisfied that the money borrowed meets this test. By providing a temporary exemption from responsible lending obligations, this reform will help small businesses get access to credit quickly and efficiently. 

Supporting the flow and reducing the cost of credit - Reserve Bank of Australia


The Reserve Bank of Australia (RBA) announced a package on 19 March 2020 that will put downward pressure on borrowing costs for households and businesses. This will help mitigate the adverse consequences of the coronavirus on businesses and support their day-to-day trading operations. The RBA is supporting small businesses as a particular priority.

The RBA has announced a term funding facility for the banking system. Banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 per cent. This will reinforce the benefits of a low cash rate by reducing funding costs for banks, which in turn will help reduce interest rates for borrowers. To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs.

In addition, the RBA announced a further easing in monetary policy by reducing the cash rate to 0.25 per cent. It is also extending and complementing the interest rate cut by taking active steps to target a 0.25 per cent yield on 3 year Australian Government Securities. 

Supporting Non-ADI and smaller ADI lenders in the securitisation market


The Government is providing the Australian Office of Financial Management (AOFM) with $15 billion to invest in structured finance markets used by smaller lenders, including non‑Authorised Deposit-Taking Institutions (Non-ADI) and smaller Authorised Deposit-Taking Institutions (ADI). This support will be provided by making direct investments in primary market securitisations by these lenders and in warehouse facilities.

AOFM’s investment will not be limited to residential mortgage backed securities. AOFM will also be purchasing assets that support small business (unsecured and secured loans) and consumer lending (including credit cards, automobiles and personal loans).

This program will assist smaller lenders, who will not benefit from the RBA’s term funding facility, to maintain access to funding and support competition in the lending market. This in turn will help keep mortgages and other borrowing costs for businesses low.

Ensuring banks are well placed to lend - Australian Prudential Regulation Authority


The Australian Prudential Regulation Authority (APRA) has announced temporary changes to its expectations regarding bank capital ratios. The changes will support banks’ lending to customers, particularly if they wish to take advantage of the new facility being offered by the RBA.

Find out more about the temporary changes to APRA's expectations regarding bank capital ratios.