Government announces increase to loan support

21 July 2020

Darren Stacey, National Leader, Finance Solutions
Partner, Debt Advisory

The Federal Government has announced an increase in the number of loans where it will provide a guarantee to Australian banks to support lending to small organisations and corporates.

This is a great initiative given the existing scheme had a patchy response, and the take up was limited. These changes will broaden the number of organisations that can access the loans

The existing scheme, which runs through to 30 September 2020 included the following rules:

  • Available to SMEs, including sole traders and not-for-profits, with a turnover of up to $50 million
  • The maximum total size of a loan was $250,000 per borrower
  • Loans up to three years, with an initial six month repayment holiday
  • Unsecured finance, meaning borrowers will not have to provide an asset as security for the loan (although we note where a borrower had an existing debt to a lender, this new debt would likely have been caught under by the bank security documents)
  • The Federal Government provides a guarantee to the lenders for 50% of the loan
  • Loans are subject to lenders’ credit assessment processes.

From 1 October 2020, lenders will be able to offer loans during the next phase on the same terms as the current scheme with the following enhancements:

  • Loans can be used for a broader range of business purposes, including to support investment in a period of economic recovery
  • The maximum loan size will be increased to $1 million per borrower
  • Loans can be up to five years rather than three years and whether there will be a six month repayment holiday will be at the discretion of the lender
  • A loan can be either unsecured or secured (excluding commercial or residential property).

While we understand these loans can be difficult to secure, these enhancements are a great step forward to provide additional funding for organisations facing challenges in these times.

A list of lenders participating in this scheme can be viewed on the Government website.

We note this is a separate loan scheme from the Show Starter Loans Scheme to provide loans to the Arts community, where the government backing is up to 100%.

If you would like to speak to the Debt Advisory team about your finances, please contact us.