How to Apply for Phase 2 of the Coronavirus SME Guarantee Program

Phase 2 of the Coronavirus SME Guarantee Program began on October 1, 2020 and includes a series of new measures to support businesses applying for loans. We take a look at what the Phase 2 changes mean for your business and how you can apply.

What is phase 2 of the SME guarantee system?

The government has extended the $ 40 billion SME guarantee program from October 1, 2020 to June 30, 2021.

All active Australian businesses, including self-employed and not-for-profit companies with an annual turnover of less than $ 50 million are eligible. Under this program, the government will guarantee 50 percent of new loans issued by participating lenders.

Phase 2 also includes improved loan conditions.

The interest rate is capped at 10% and the amount of eligible loans guaranteed under the program has increased from $ 250,000 under phase 1 to $ 1 million under phase 2. Loans guaranteed and unsecured are allowed.

Business owners who have Phase 1 loans can apply for new loans of up to $ 1 million in Phase 2 or refinance Phase 1 loans to Phase 2 loans.

“The Coronavirus SME Guarantee Program is helping small and medium-sized enterprises (SMEs) access cheaper finance so they can adapt and innovate during the coronavirus crisis,” said a spokesperson for the Coronavirus. Treasure.

According to data provided by the Treasury, the SME guarantee program has already helped “nearly 20,000 companies to access credit at an average interest rate of 5.5%”.

ABS data shows that there are over 2.3 million SMEs in Australia, 93 percent of which are small businesses.

Where can I apply for a loan under this scheme?

According to the latest data provided on the Treasury website, there are so far nine participating financial lenders approved in Phase 2.

Approved lenders are:

  • ANZ
  • Commonwealth of Australia Bank
  • Community First Credit Union Limited
  • Credibility
  • Finstro Securities Pty Ltd
  • Obtain capital
  • Metro Finance Pty Ltd
  • National Bank of Australia Limited
  • Westpac banking company

bad credit loans made under the SME Guarantee Program will have different names depending on the lender and the interest rate they charge may vary.

For example, the Commonwealth Bank of Australia (CBA) provides the secured loan under the “BetterBusiness” loan and the National Australia Bank calls it the “Business Support” loan.

“This next phase of the SME Guarantee Scheme will allow some companies to continue trading despite ongoing challenges, and others to make important investment decisions that will prepare them for the future,” said a door. – spoken by the ABC.

Is the demand for financing decreasing?

The RBA suggested that low demand for credit from SMEs is the main reason for low utilization of Phase 1 of the SME Guarantee Scheme.

“Use of the government’s $ 40 billion SME loan guarantee program has remained low. About $ 1.6 billion in loan commitments were made under this program, which is equivalent to about ½ percent of outstanding loans to SMEs. The low take-up rate is consistent with a lack of credit demand in general, ”the RBA wrote in its August 2020 statement on monetary policy.

The RBA also wrote that “some banks have linked in liaison that they are more cautious about lending to new customers and sectors significantly affected by the pandemic, such as small retailers, tourism and commercial real estate.”

According to the August 2020 Sensis Business Outlook & Confidence Survey for SMEs, 26% of business owners surveyed had been turned down for funding in the previous three months.

The survey also showed a decrease in funding requests from 17% in December 2019 to 13% in August 2020.

Sensis CEO John Allan has expressed concerns for the hospitality and accommodation sectors, which have been significantly affected by the coronavirus.

“43% said it was more difficult to get funding. It was well ahead of any other sector with the industry average at 36 percent. One in three said they were pushed back for funding compared to the industry average of 26%. ”

This corresponds to the RBA’s October 2020 Financial Stability Review document.

“At least 10-15% of small businesses in hardest-hit industries still don’t have enough cash to cover their monthly expenses,” the RBA wrote.

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