SME guarantee scheme loans


The Coronavirus SME Guarantee Scheme recently launched by the Federal Government has been designed to provide support for Small to Medium Enterprises (SME). Under the Scheme, the Government will provide a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital. This should enhance and encourage these lenders’ willingness and ability to provide credit, which in turn should result in SMEs being able to access additional funding to help support them through the upcoming months and to recover on the other side.

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

What are the terms?

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

  • a 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; and
  • 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.

Importunately, loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into consideration the uncertainty of the current economic conditions caused by COVID-19.

It is important to understand that if you did not fit into a bank’s lending criteria pre-Coronavirus, due to any number of credit reasons, it is highly unlikely that you will now. However, you should make sure you are approaching the correct financial institution with the product that suits your needs so it is best to seek assistance from a Broker to help.

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

The Scheme has commenced and be available for new loans made by participating lenders until 30 September 2020.

How to apply

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

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