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The Scheme

The Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme is supporting up to $40 billion of lending to SMEs (including sole traders and not-for-profits) by guaranteeing 50 per cent of new loans issued by participating lenders to SMEs.

The purpose of the scheme is to provide many otherwise viable SMEs access to unsecured working capital, to help get through the impact of Coronavirus, recovery and to invest for the future. Phase 1 commenced on 23 March 2020 and closed for new loans on 30 September 2020.

Phase 2

Phase 2 of the Scheme commenced on 1 October 2020 and will be available for loans made by participating lenders until 30 June 2021. It includes targeted amendments to meet the evolving needs of SMEs, but will continue to support lenders’ ability to provide credit and ensure that SMEs benefit from low interest rates.

Businesses that have accessed loans in Phase 1 can apply for additional loans of up to $1 million in Phase 2, and can also seek to refinance Phase 1 loans into Phase 2 loans, but loans issued under the Scheme cannot be used for any other refinancing purposes.

Businesses are permitted to take out multiple guaranteed loans with either the same lender or multiple lenders, provided the total amount does not exceed $1 million per borrower in Phase 2.

Who is lending?

Loans backed by the Scheme will be available through participating commercial lenders a list of which can be found here.

If a lender declines your application or you are not satisfied with the product on offer, you are permitted to approach other lenders and businesses are being encouraged to shop around and compare products offered by different participating lenders.

What can you use the loan for?

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

  • 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.

What are the rates and fees?

The interest rate on loans will be determined by lenders, but will be capped at around 10 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.

Fees will be determined by lenders but can only be charged to the extent they are consistent with fees on similar loans outside the Scheme.

Unsecured and secured lending available

Both unsecured and secured lending will be permitted under the Scheme and lenders are permitted to take guarantees. For secured loans, lenders will be permitted to take any security, except residential property.

Borrowers are fully responsible for repaying the loans made under the Scheme and if the borrower is unable to meet repayments, lenders will follow their usual default processes.

Speak to our team

It’s always important to get good advice and that’s particularly true in turbulent times. If you need help please talk to us on 1300 513332 or use our online enquiry form. We can offer initial consultations, advice and support over the phone if you have any concerns about face-to-face meetings.

And please feel free to share this information with your customers to help them plan their business affairs during these challenging times.

Date published 19 May 2021 | Last updated 19 May 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.


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