More lenders appointed to SME Guarantee Scheme

Treasury has confirmed that a total of nine lenders have so far been selected to participate in phase 2 of the SME Guarantee Scheme, which commenced on 1 October.

While the government has not yet released the full list of participating lenders (expressions of interest don’t close until Friday, 16 October 2020), Treasury has said that it has made one new offer to eligible lenders and is awaiting the finalisation of legal documents.

The four major banks have all now been confirmed as participating lenders in the scheme, as have several additional lenders, including: 

• Community First Credit Union Ltd
• Credabl
• Finstro Securities Pty Ltd
• Get Capital
• Metro Finance Pty Ltd

Commercial auto and equipment finance lender Metro Finance and specialist SME business payments provider Finstro are among the new lenders to join the scheme since it was restructured.

Finstro’s chief product officer, Tom Whitworth, said the lender was “pleased” to be joining the scheme and “helping to quickly deliver capital to small businesses during this challenging time”.

He said: “Australia’s road out of the COVID-19 recession depends on the health of our small-business community. 

“Trade credit is a key tool of SME cash flow management and has become even more important in the face of COVID-19. As credit risk has increased within the SME market, many suppliers are reducing the trade terms they offer business clients, and many small businesses have moved to cash-on delivery, placing further pressure on cash flows,” he said. 

Finstro is therefore offering eligible small businesses a specialist Line of Trade Credit of up to $250,000 with flexible repayment options, including up to 12 months of no repayments. 

“The government-backed Finstro Line of Trade Credit will also give suppliers the confidence to offer trade credit again, by offering them payment upfront and providing extended and flexible trade terms to their small-business customer,” the chief product officer said. 

“Fintech lenders have a vital role to play in supporting SMEs through the pandemic and beyond. We are proud to be doing our part in helping the SME community,” he continued.

“We are working closely with our SME clients to ensure they have the flexibility and support they need to keep their businesses going and are looking forward to extending this support to more SMEs through this important program,” Mr Whitworth concluded. 

How phase 2 is different

The first phase of the scheme, which drew criticism from banks, brokers and non-banks, saw limited uptake of the loans. 

According to Treasury figures, the scheme had supported just 15,600 business loans worth $1.5 billion up to July 2020 – while the entire package was up to $40 billion.

It was announced in late July that the government would be extending the scheme in phase 2 to permit secured lending and increase the maximum loan size and terms, in a bid to provide greater utility.

Under the new phase – available for loans made by participating lenders until 30 June 2021 – SMEs will now be able to access the scheme to use loans for more than just working capital (so that a wider range of investment can be funded) and secured lending will be permitted (excluding commercial or residential property).

It will be up to the discretion of participating lenders should they wish to offer a repayment holiday period.

The expanded scheme aims to shift the priority away from providing access to working capital to helping businesses stay afloat during the crisis to helping them access more affordable and longer-term credit so that they can prepare and invest for the future.

[Related: LATEST PODCAST: The budget 2020-21]