Supporting the Flow of Credit


The Government is supporting the flow of credit to cushion the economic impact of the Coronavirus and help build a bridge to recovery.

Support financing needs of SMEs on JobKeeper

SME Recovery Loan Scheme

The Government’s SME Recovery Loan Scheme s designed to support the economic recovery, and to provide continued assistance to firms that received JobKeeper and businesses that have been impacted by the floods in eligible LGAs. The Government will work with lenders to ensure that eligible firms will have access to finance to maintain and grow their businesses.

The SME Recovery Loan Scheme builds on the framework established in the two phases of the Coronavirus SME Guarantee Scheme and includes a number of more generous features.

It will be available to firms with turnover of up to $250 million that were either recipients of JobKeeper in the March quarter of 2021 or have been affected by the floods in eligible LGAs in March 2021.

Key features of the Scheme include:

  • An 80% government guarantee;
  • Permitting borrowers to refinance existing loans into the Scheme, including those from the SME Guarantee Scheme;
  • Allowing lenders to offer a repayment holiday of up to 24 months
  • A 7.5% interest rate cap;
  • A maximum loan size of $5 million; and
  • A maximum loan term of ten years.

Loans under the SME Recovery Loan Scheme can be used to support a wide range of business purposes, excluding the purchase of residential property, the purchase of financial products, the provision of finance to an associated entity, or lease, rent, hire or hire purchase existing assets that are more than half way into their effective life. 

The Scheme commences on 1 April 2021 and closes for new loans on 31 December 2021.

Coronavirus SME Guarantee Scheme

Under the Coronavirus SME Guarantee Scheme, the Government is supporting up to $40 billion of lending to SMEs by guaranteeing 50 per cent of new loans issued by eligible lenders to SMEs.

The Coronavirus SME Guarantee Scheme is enhancing lenders’ ability to provide cheaper credit, allowing many otherwise viable businesses to access funding to get through the impact of Coronavirus, recover and invest for the future.

Phase 1 provided SMEs with access to unsecured working capital loans as they faced significant challenges due to disrupted cash flows, and was available for new loans from 23 March 2020 to 30 September 2020.

The Government extended and enhanced the Coronavirus SME Guarantee Scheme to enable continued support for businesses in recovery and for those facing the ongoing impact of the pandemic. As part of the extension, the Government made targeted amendments to parameters to meet the evolving needs of businesses.

Phase 2 is continuing to support lenders’ ability to provide credit and ensure that SMEs benefit from lower interest rates. Phase 2 commenced on 1 October 2020 and will be available for loans made until 30 June 2021.

Show Starter Loans Scheme

The Government’s $250 million COVID-19 Creative Economy Support Package includes a $90 million Show Starter Loans Scheme. These loans will be delivered as part of the Coronavirus SME Guarantee Scheme, with the Government guaranteeing 100 per cent of loan amounts. This will support concessional loans to assist creative economy businesses to fund new productions and events, to be delivered through commercial lenders and supported by terms and conditions tailored to the arts and entertainment sector. Further information on the Show Starter Loans and the COVID-19 Creative Economy Support Package is available from the Office for the Arts.

Quick and efficient access to credit for small business

The Government is cutting red tape by providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers. This reform will help small businesses get access to credit quickly and efficiently. This exemption will be made permanent as part of a broader package of reforms to Australia’s lending laws, commencing 1 March 2021, which will remove the ambiguity in lending laws to allow small businesses get access to credit simpler and faster.

Reserve Bank of Australia – supporting the flow and reducing the cost of credit

The Reserve Bank of Australia (RBA) announced a package on 19 March 2020 that has put downward pressure on borrowing costs for households and businesses. This is helping 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 established a term funding facility for the banking system. Banks will have access up to $200 billion in funding at a fixed interest rate of 0.25 per cent. This reinforces 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 implemented a further easing in monetary policy by reducing the cash rate target 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.

Support for 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-ADIs) and smaller Authorised Deposit-Taking Institutions (ADIs). This support is being provided through direct investments that provide cheaper funding to these lenders.

Fact sheet

PDF file

See also