Key Points:

• The Coronavirus SME Guarantee Scheme has been extended to 30 June 2021
• The Treasurer has announced a post-September tailoring of the scheme to serve more businesses
• Secured lending will also be permitted, excluding commercial or residential property, and the maximum loan size will be lifted to $1 million from the initial $250,000.

The Coronavirus SME Guarantee Scheme has been extended to 30 June 2021, to support more small and medium-sized businesses in trying to adapt and innovate during the coronavirus crisis.

To attract more SMEs to the scheme and adapt to the new COVID-safe economy, the Treasurer has announced a post-September tailoring of the scheme to serve more businesses.  From 1 October, Small businesses with a turnover of up to $50 million can apply for the loans from 44 approved lenders.

The scheme’s popularity has been limited to date, with only 15,600 businesses applying for loans worth a combined $1.5 billion, compared to the scheme’s planned value of $40 billion.  As a result, the purpose of the loans has been modified to extend beyond working capital and allow funding of a wider range of investments.

Secured lending will also be permitted, excluding commercial or residential property, and the maximum loan size will be lifted to $1 million from the initial $250,000. Other changes include an increase of the maximum loan term (five years from the original three) and the introduction of lender discretion to offer repayment holiday periods.

“The extended terms of the scheme will enable lenders to continue supporting Australian small businesses when they need it most,” Mr Frydenberg said.

“The expanded scheme will shift from providing access to working capital to helping businesses stay afloat during the crisis to now also enabling them to access more affordable and longer-term credit so that they can invest for their future.”

The initial phase of the scheme remains available for new loans issued by eligible lenders until 30 September 2020, with the second phase of the scheme to kick off on 1 October 2020 and run until 30 June 2021.

Commenting on the Treasurer’s announcement, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell said she supports this next phase of the Coronavirus SME Loan Guarantee Scheme. Ms Carnell commented that the extended terms of the scheme provide small businesses more affordable credit over a longer period so they can invest in their future and as the loans are unsecured, it means business owners don’t have to provide their home as security for the loan.

If you have any questions or need advice and clarity specific to your business, feel free to contact Semmens & Co on 03 8320 0320 for a free consultation.