SME Loan Guarantee Scheme

Full Breakdown Including Details of the SME Loan Guarantee Program, Who’s Eligible and How to Apply

The Australian Government has recently announced a second major economic rescue package worth $66bn, on top of the initial $17.6bn package and more than $100bn in emergency banking measures to prevent a credit freeze. In emergency measures specifically to support the flow of credit to Australian SMEs the Government has pledged to back $40 billion of loans through the SME Loan Guarantee Scheme.

Under the Coronavirus funding provided by SME Guarantee Scheme the Government will guarantee 50% of new loans issued by eligible lenders to SMEs. With 50% of the loan secured through a government SME loan guarantee it increases the lenders willingness and ability to provide credit. SMEs with viable businesses will be able to access vital additional funding to survive the impact of Coronavirus.

Submit Quick Application for the SME Loan Guarantee Program

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Key Terms of the SME Loan Guarantee Scheme

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

  • Maximum total size of loans up to $250,000 per borrower (either in one facility or split between multiple facilities).
  • Loans available for up to three years, with an initial six month repayment holiday.
  • Loans are issued on an unsecured basis. The Government is providing a guarantee for 50% of the value of the loan but SMEs will not have to provide any assets to secure the loan.

It must be noted that whilst the Government is providing a guarantee for the loan this is not a Government SME loan.  The decision on whether to extend credit and the ongoing management of the loan remains with the lender. However, with the increased support through the SME Loan Guarantee Scheme the Government expects lenders to look through the current economic conditions and make sensible lending decisions based on the usual performance of the business and on the basis the Government will provide a guarantee for 50% of the loan.

The Government is encouraging lenders to provide facilities to SMEs that only have to be drawn if needed by the SME. So there will be a preference for lending solutions such as a revolving line of credit as opposed to a straight up small business loan. A line of credit is supplied by a number of the major SME lenders including Prospa, who are also an eligible lender in the Government SME Loan Guarantee Scheme. Facilities such as a line of credit mean that SMEs will only incur interest on the amount they draw down. If there is no need to draw down any funds from the facility right now then no interest will be charged but the facility remains in place as and when it is needed.

Who’s Eligible for a Loan Under the Coronavirus SME Guarantee Scheme?

All active Australian businesses with a 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 a Government SME loan. This includes individuals who are self-employed individuals and not-for-profit businesses.

Loans must be used to support current and upcoming cash flow requirements (such as rent and salary costs) and must be used for business purposes only. The Government has instructed lenders to satisfy themselves of this by:

  • Lending through a designated business product.
  • Seeking a declaration from the borrower.
  • Other means acceptable to the lender.

Lenders can offer any product deemed suitable for these purposes, with the exception of credit cards. Loans issued under the Scheme cannot be used to refinance any existing drawn facilities but businesses are entitled to more than one loan under SME Loan Guarantee providing the total value of all facilities does not exceed $250,000.

SMEs who would like to apply should apply here or contact one of the participating lenders. Participating lenders are required to consider applications from new customers as well as their existing customer base.

Which Lenders are Participating in the SME Loan Guarantee Scheme?

The Government has made offers to 34 lenders who wish to participate in the Coronavirus SME Guarantee Scheme. However, for now, it is just the following eight lenders who have finalised the necessary documentation to participate in the scheme:

  • Heritage Bank Limited
  • Judo Bank Pty Ltd
  • Liberty Financial
  • Moula Money
  • MyState Bank Limited
  • Prospa
  • Regional Australia Bank Ltd
  • The Capricornian Ltd

If you’re an eligible SME and would like to begin your application for the Government SME Loan Scheme you can do it right now with Prospa. Prospa is the largest and most respected online lender in Australia, with a 4.9 / 5 TrustScore on TrustPilot based on over 5000 SME reviews. If your business requires quick access to capital, Prospa is used to providing a lending decision and releasing funds in under 24 hours.

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How Long Is The Government SME Loan Guarantee Scheme Open?

Government SME funding applications have been available with Commonwealth bank since the 23rd March 2020. To date, the bank has already funded over $200 million to SMEs. Of the loans approved, 43% are from NSW and 26% are from Victoria. Close to one in six of the businesses approved for loans have been in hospitality (15%), with construction (13%), professional services (12%) and retail (11%) businesses also strongly represented.

More recently Prospa has received access to the Australian government’s SME Loan Guarantee Scheme to support small businesses impacted by the COVID-19 pandemic. Prospa has received an allocation of up to $223 million which can be applied to all eligible new lines of credit and loans issued by Prospa from the 14th April 2020.

Loans must be approved by lenders by 30th September 2020 in order to be eligible under the SME Loan Guarantee Scheme. Upon approval, SMEs will receive a six month repayment holiday. 

The Loan Guarantee Scheme could finish earlier than 30th September, depending on how fast the $40 billion package is consumed by SMEs. For this reason it is advisable to consider making loan applications early, particularly for facilities such as a line of credit where you will only pay interest when you utilise the facility.


#1 Best Small Business Financing in Australia: Works with Multiple Lenders
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  • Full Application Through Lend
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