Financing business needs just got easier

If you run a small business, chances are the opportunities offered by the SME Guarantee Scheme could be much welcomed news.

Published 07 April 2021

If you haven’t heard about the Federal Government’s Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme, here we take a look at what the Scheme is about and how your business could potentially benefit.

What’s the Scheme about?

The SME Guarantee Scheme will see the Federal Government support up to $40 billion of lending to SMEs (including sole traders and not-for-profits). The first phase of the Scheme was launched earlier this year, and remains open until 30 September 2020. Phase Two kicks off on 1 October 2020 and remains available until 30 June 2021. 

What’s in it for my business?

Plenty! The real appeal of the Scheme is that the Federal Government guarantees 50% of the value of new loans to SMEs.1

A government-backed guarantee makes these loans a lot less risky for lenders. And that means your business can pay a much lower interest rate on commercial finance.

Long story short, the Scheme can help your SME access much-needed funds at an affordable rate.

What businesses are eligible?

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.1

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

What are the requirements?

Loans issued under the Scheme can be used for a broad range of businesses purposes (including to support investment) but cannot be used to2:

  • purchase of residential property;
  • purchase of financial products;
  • lending to an associated entity; or
  • 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 purposes3.

For further information on eligibility and requirements visit: https://treasury.gov.au/coronavirus/coronavirus-sme-guarantee-scheme/information-for-smes

Why two phases?

Okay, here’s where things get interesting.

Under Phase 1, which runs until 30 September 2020, the maximum loan size is $250,000. The loan can run for up to three years with an initial 6-month repayment holiday. Even better, this is unsecured finance. So you won’t have to provide an asset as security for the loan. 

Phase 2, which kicks in on 1 October 2020, provides loans of up to $1 million with terms of up to five years. It’s up to the lender to decide if there’s a repayment holiday, and the loans can be either unsecured or secured by property. 

Choosing the right lender matters

The SME Guarantee Scheme could be a brilliant solution for your business to take charge of the recovery process, invest for the future – and potentially take advantage of the instant asset write-off. 

Right now is not the time to take your eyes off the ball, and with a number of lenders having signed up to the Scheme3, it’s hard to know which lender is offering the most appropriate deal for your business. That’s where your Mortgage Choice broker comes in.

Expert advice adds up

Your local Mortgage Choice broker can assess your situation to find the loan and lender best-matched to your business needs. Low rates on commercial funding are an opportunity too good to go past. Talk to your Mortgage Choice broker today to find how the SME Guarantee Scheme could benefit your business.

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Posted in: Small business