The Government Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme was designed to allow easier lending to businesses/SMEs (including sole traders and not-for-profits). It makes it easier for a lender to offer a unsecured loan and repayment holiday:

  • Under the Scheme, the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.
  • The Scheme will enhance lenders’ willingness and ability to provide credit, supporting many otherwise viable SMEs to access vital additional funding to get through the impact of Coronavirus.
  • The Scheme will be available for new loans made by participating lenders until 30 September 2020.

The nuts and bolts

The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • SMEs, including sole traders, with a turnover of up to $50 million.
  • Maximum total size of loans of $250,000 per borrower.
  • Loans will be for up to three years, with an initial six month repayment holiday.
  • Unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

The decision on whether to extend credit, and management of the loan, will remain with the lender.

This is about as sweet a deal as the government could make with the lenders, it will provide much needed funds to business.

Second to the stimulus payments this is another good initiative to support business and help them through this difficult time.

https://treasury.gov.au/coronavirus/sme-guarantee-scheme#:~:text=The%20Government%20will%20provide%20eligible,initial%20six%20month%20repayment%20holiday.

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