COVID-19 National: Business, Non-Profits, Individuals – Coronavirus SME Guarantee Scheme

This program aims to enhance 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. It forms part of the Australian Government's Economic Response to the Coronavirus which provided timely support to affected workers, businesses and the broader community, and has kept Australians in work, and businesses in business.

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 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. It will continue to support lenders’ ability to provide credit and ensure that SMEs benefit from low interest rates.

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%, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.

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.

A total funding pool of $40 billion is available.

Eligible applicants include all active Australian businesses with turnover of less than $50 million in the previous financial year, or expected turnover of less than $50 million in the current financial year are eligible to apply for loans under the Scheme. Both self‑employed individuals and non-profit businesses are eligible.

Businesses that have accessed loans in Phase 1 can also apply for loans in Phase 2.

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 of residential property.
- Purchase of financial products.
- Lending to an associated entity.
- Lease, rent, hire, 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 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.