As of late last week, the SME Guarantee Scheme has entered the next phase to support a larger number of small and medium-sized businesses adapt and innovate during the coronavirus crisis.
The purpose of the loans entered into under the scheme has now been modified to extend beyond working capital and allow funding of a wider range of investments.
Secured lending is now also permitted, excluding commercial or residential property, and the maximum loan size has been lifted to $1 million from the initial $250,000.
Other changes include an increase of the maximum loan term to five years (from three years) and the introduction of lender discretion to offer repayment holiday periods.
“The extended terms of the scheme will enable lenders to continue supporting Australian small businesses when they need it most,” Treasurer Josh Frydenberg said in announcing the scheme’s extension in July.
“The expanded scheme will shift from providing access to working capital to helping businesses stay afloat during the crisis to now also enabling them to access more affordable and longer-term credit so that they can invest for their future.”
According to figures released by the Treasury, the first phase of the scheme only saw 15,600 businesses get their hands on loans worth a combined $1.5 billion, compared with the scheme’s planned value of $40 billion.
While 44 lenders participated in the first phase of the government’s scheme, the Treasury has to date confirmed that three lenders will continue to take part including GetCapital, NAB and Westpac.
The Treasury did, however, note that it is considering other applications and has made another six new offers to eligible lenders, but is awaiting the finalisation of legal documents.
Speaking exclusively at MyBusiness Week, Australian Banking Association executive director of policy Aidan O’Shaughnessy said the SME Guarantee Scheme was “a little bit before its time”.
“I think small businesses during the height of the pandemic just said, ‘I’m not confident about taking on additional borrowings right now’,” Mr O’Shaughnessy said.
“What we found was some people said, yes, it’s perfect for me and I will use it, but others said, actually, I would prefer a different product, for example, the overdraft.”