Coronavirus (COVID-19) updates from the Australian Government

Coronavirus SME Guarantee Scheme - supporting the flow of credit

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The Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme is supporting up to $40 billion of lending to SMEs (including sole traders and not-for-profits) by guaranteeing 50 per cent of new loans issued by participating lenders to SMEs.

The Scheme is enhancing lenders’ ability to provide cheaper credit, allowing many otherwise viable SMEs to access vital additional 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 to help them manage disrupted cash flows and get through the impact of the Coronavirus. It commenced on 23 March 2020 and closed for new loans on 30 September 2020.

The Scheme has now been extended and enhanced to support businesses in recovery and to enable continued support for SMEs facing the ongoing impacts of the Coronavirus. Phase 2 includes targeted amendments to the Scheme’s parameters to meet the evolving needs of SMEs. Phase 2 of the Scheme will continue to support lenders’ ability to provide credit and ensure that SMEs benefit from low interest rates.

Phase 2 of the Scheme commenced on 1 October 2020 and will be available for loans made by participating lenders until 30 June 2021.

SMEs, including sole traders and not-for-profits, with a turnover of up to $50 million are able to apply for loans under the Scheme.

SMEs that accessed loans under Phase 1 of the Scheme are able to apply for loans in Phase 2.

Participating lenders are offering guaranteed loans on the following terms under Phase 2:

  • Loans can be used for a broad range of business purposes, including to support investment.
  • Borrowers can access up to $1 million in total.
  • Loans are for terms of up to 5 years, and a repayment holiday is not required but can be offered at the discretion of the lender.
  • Loans can be either unsecured or secured (excluding residential property).
  • The interest rate on loans will be determined by lenders, but will be capped at around 10 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.

Lenders can offer any product suitable to the borrower, with the exception of credit cards, charge cards, debit cards or business cards. Loans issued in Phase 2 may take any other form of credit, provided the Scheme’s eligibility criteria are met.

Loans issued under the Scheme can be used for a broad range of businesses purposes (including to support investment) but cannot be used to: 

  • purchase residential property;
  • purchase financial products;
  • lend to an associated entity; or
  • lease, rent, hire or hire purchase existing assets that are more than half way into their effective life.

Borrowers can seek to refinance an existing Phase 1 loan into a Phase 2 loan. Borrowers may also refinance a Phase 2 loan between different participating lenders during the application period of 1 October 2020 and 30 June 2021. Loans issued under the Scheme cannot be used for any other refinancing purposes. 

Loans backed by the Scheme will be available through participating commercial lenders. The decision on whether to extend credit, and management of the loan, will remain with the lender. However, the Government expects that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.

Borrowers can access credit under Phase 2 of the Scheme through any lenders approved to participate. View the list of participating lenders in Phase 2.

For more information on how to apply, visit Information for SMEs

The Coronavirus SME Guarantee Scheme Phase 1 provided SMEs with access to unsecured working capital loans of up to $250,000 to help them get through the impact of the Coronavirus.

Phase 1 commenced on 23 March 2020 and ceased for new loans on 30 September 2020. For more information on Phase 1, visit SME Guarantee Scheme Phase 1

The Government’s $250 million COVID-19 Creative Economy Support Package includes the $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.