Coronavirus (COVID-19) updates from the Australian Government

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 for immediate cash flow needs for SMEs

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

Phase 2 of the Scheme will continue 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.

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