Small and medium sized businesses (SMEs) struggling as a result of the pandemic are set to get up to $40 billion of relief after the government announced it is expanding the SME Guarantee Scheme ahead of its economic update on Thursday.
The initial phase of the scheme remains available for new unsecured loans up to $250,000 issued by eligible lenders until September 30 for a maximum loan period of three years with a six-month repayment holiday.
The second phase will commence on October 1 and will be available through to June 30 next year and extends the purpose of loans able to be provided beyond working capital so that a wider range of investment can be funded.
In addition, the next phase will permit secured lending (excluding commercial or residential property), increases the maximum loan size to $1 million and increases the maximum loan term to five years. Lenders will now have the discretion to offer a repayment holiday period.
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Treasurer Josh Frydenberg says 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.
Commonwealth Bank chief executive Matt Comyn agrees and welcomes the extension.
"Today's lifting of the amount available to $1 million and the loan extension to five years will allow SMEs access to low-cost, guaranteed funding and to make the investments needed to get people back to work, create new jobs and lift confidence across the economy as part of the broader efforts to combat the impact of the coronavirus on our country," he said.
The government is guaranteeing 50% of new loans to SMEs in partnership with 44 approved lenders but the scheme has seen only 15,600 businesses accept loans worth $1.5 billion.
Half the loans made available through the scheme have been provided by Commonwealth Bank according to Comyn.
SMEs with a turnover of up to $50 million will be eligible to receive these loans.