Australia Extends Coronavirus SME Guarantee Scheme

Source: Regulation Asia Editors, Regulation Asia 2020-07-21

With the extension, the government is expanding the allowed purpose of the loans, increasing the maximum loan size and duration, and allowing secured lending and repayment holidays.

Australia’s Treasury has announced it is extending the Coronavirus SME Guarantee Scheme, to support continued lending to SMEs, including sole traders and not-for-profits.

Under the existing Scheme, which commenced in April and was due to end on 30 September, the government guarantees 50 percent of new loans issued to SMEs by eligible lenders, to enhance their willingness and ability to provide credit and support to SMEs.

The Scheme has seen more than 15,600 businesses accept loans worth AUD 1.5 billion. The second phase of the scheme will commence on 1 October and tun until 30 June 2021.

With the extension, the government is expanding the allowed purpose of loans to go beyond working capital so that a wider range of investment can be funded.

Secured lending (excluding commercial or residential property) will also be permitted, unlike the earlier phase of the scheme, where borrowers did not have to provide assets as security for the loans.

The maximum loan size will also be increased from AUD 250,000 to AUD 1 million per borrower, and the maximum loan term is being increased from three to five years.

Lenders are also granted the discretion to offer a repayment holiday period on the new loans.

“The extended terms of the Scheme will enable lenders to continue supporting Australian small businesses when they need it most,” the Treasury said.

“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.”

Treasurer Josh Frydenberg has also pledged to extend the JobKeeper Payment scheme, a temporary AUD 1,500 per worker subsidy for businesses significantly affected by Covid-19.

An estimated 3.5 million people across 920,000 businesses were supported by the wage subsidy between April and May – amounting to a AUD 70 billion price tag.

Australia Extends Coronavirus SME Guarantee Scheme

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