The Federal Government, the Reserve Bank of Australia and the Australian Prudential Regulation Authority have united to support the flow of credit in the Australian economy, in particular for small and medium enterprises (SMEs).
Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50 per cent to lenders to SMEs for new, unsecured loans to be used for working capital. The scheme is estimated to support up to $40 billion of lending to SMEs.
The Scheme will commence early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
Key points to note:
- SMEs with a turnover of up to $50 million will be eligible for these loans;
- the maximum total size of loans will be limited to $250,000 per borrower;
- the loans will be up to 3 years, with an initial six-month repayment holiday;
- the loans will be in the form of unsecured finance.
The Treasury has advised interested SMEs to approach their financial institution for more information, and that despite the scheme officially commencing in April, some lenders may be able to provide credit sooner.