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A Federal Government SME loan scheme will be extended, giving Australian businesses access to more funding during the COVID-19 recovery phase.
Under the existing 'Coronavirus SME Guarantee Scheme' the Government has been partnering with 44 approved lenders to guarantee 50 per cent of new unsecured loans to SMEs.
The next phase of the scheme is intended to assist business to move out of hibernation and adapt to the new economic reality.
Key changes to the SME Guarantee Scheme include:
- Extending the purpose of loans able to be provided beyond working capital, such that a wider range of investment can be funded;
- Permitting secured lending (excluding commercial or residential property);
- Increasing the maximum loan size to $1 million (from $250,000) per borrower;
- Increasing the maximum loan term to five years (from three years); and
- Allowing lenders the discretion to offer a repayment holiday period.
The initial phase of the Scheme remains available for new loans issued by eligible lenders until 30 September 2020. The second phase will start on 1 October 2020 and will be available until 30 June 2021.
"The extended terms of the Scheme will enable lenders to continue supporting Australian small businesses when they need it most," says the Federal Government.
"The expanded Scheme will shift from providing access to working capital to helping businesses stay afloat during the crisis to now also enabling them to access more affordable and longer term credit so that they can invest for their future."
Up to $70 billion in income support on its way
Over the weekend, Federal Treasurer Josh Frydenberg (pictured) promised to spend $70 billion to extend JobKeeper payments ahead of a review of the program to be delivered later this week.
In an interview with The Age and The Sydney Morning Herald Frydenberg said the new funding will ensure Government support will be forthcoming as infections of COVID-19 continue to impact the economy.
"There's a lot of uncertainty in the economic environment and the Victorian situation is a significant setback," Frydenberg told The Age and The Sydney Morning Herald.
"It's diminished confidence beyond the Victorian border and the recovery is a confidence game."
Speaking to Sky News on Sunday Finance Minister Mathias Cormann said further support will be delivered to employers that have been particularly impacted by the COVID-19 crisis.
It is expected that the government will adjust eligibility criteria for JobKeeper, with companies with up to $1 billion in turnover eligible if they suffered a 30 per cent fall in business, and companies with more than $1 billion eligible if they suffered a 50 per cent fall.
"As we get to the end of the six months, towards the end of September, it is going to be important to reassess which businesses still should be receiving this support," Senator Cormann said to Sky News.
The extension of these support programs for Australian businesses comes as Australia's unemployment rate hit its highest levels in more than two decades in June at 7.4 per cent.
Close to a quarter of a million people entered part-time employment in June, according to the latest figures from the Australian Bureau of Statistics (ABS).
The number of people employed in full-time jobs decreased by 38,100, but on the balance there was a rise of 210,800 in employment overall.
The underemployment rate decreased by 1.4 percentage points to 11.7 per cent, but remained 2.9 percentage points above March.
Updated at 9:40am AEST on 20 July 2020.
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