There are over two million small and medium enterprises in Australia, all of which have been affected in some way by COVID-19, be it positively or negatively. There have been several initiatives announced to help these SME’s through the crisis, the major ones being JobKeeper and the Coronavirus SME Guarantee Scheme. What is this scheme and is it something owners of a SME should consider?


The Coronavirus SME Guarantee Scheme will provide small and medium sized business with timely access to working capital to help them get through the impact of the Coronavirus.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • SMEs, including sole traders, with a turnover of up to $50 million.
  • Maximum total size of loans of $250,000 per borrower.
  • Loans will be up to three years, with an initial six month repayment holiday.
  • Unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Under the Scheme, the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.

The Scheme will enhance lenders’ willingness and ability to provide credit, supporting many otherwise viable SMEs to access vital additional funding to get through the impact of Coronavirus, and will be available for new loans made by participating lenders until 30 September 2020.

There are currently 36 lenders who are participating in the scheme, including all four major banks and several large tier 2 lenders.


  1. Loan terms of 3 years with a six month repayment holiday – Firstly, any assistance for SME’s during this time is welcome. We all hope the economic affects are short-term and businesses can get back to normal operations soon. However, there is a distinct possibility that it will take longer than a few months for businesses to operate at a level close to where they were pre-pandemic. Owners of these SME’s need to be mindful that, once the initial repayment holiday expires, they will need to be able to meet loan repayments which may be quite high, given the short-term nature of the finance.
  2. Loan funds can only be used for cash-flow purposes (paying staff, rent of a premises, etc). You cannot use these funds to refinance other existing debt or buy an asset, so this will be an additional commitment the business will need to meet.
  3. Participating lenders will determine a SME’s borrowing capacity using a combination of current and historic business performance information, such as BAS, previous business tax returns and financial statements. If the business takes longer to recover than the initial six-month repayment holiday then their capacity to meet this new loan repayment will be impacted.  
  4. Interest is capitalised for the initial six months. Once this repayment holiday period expires the loan amount to be repaid will be greater than the initial amount borrowed. If a business has the capacity they can make repayments during the repayment holiday period to reduce the amount of interest charged.
  5. The Government Guarantee – these loans are partially guaranteed by the Federal Government to provide the participating lenders with some security that, if the borrowing SME is unable to meet the loan repayment commitment, the Bank will at least be able to retrieve some of the debt (50%) via the Guarantee. The SME is still effectively on the hook for the full amount, the Guarantee is just a safety net for the lender.
  6. Application Fees – most lenders are waiving the normal application and monthly fees associated with these loans under the Scheme.

Assistance for SME’s is vital to help them navigate their way through the current economic environment. If you are a sole-trader or small to medium enterprise who would be eligible to participate in the Scheme, your local mortgage broker is well-placed to run through the pros and cons of this option. At SHL Finance we are open for business and able to assist you with any business lending requirements. For more information please call Reece Droscher on 0478 021757, or email

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