Coronavirus SME Guarantee Scheme
Under the Scheme, the Government will provide a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital. This will enhance these lenders’ willingness and ability to provide credit, which will result in SMEs being able to access additional funding to help support them through the upcoming months. SMEs with a turnover of up to $50 million will be eligible to receive these loans. The Government will provide eligible lenders with a guarantee for loans with the following terms:
Maximum total size of loans of $250,000 per borrower.
The loans will be up to three years, with an initial six month repayment holiday.
The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.
The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
Supporting the flow and reducing the Cost of Credit - Reserve Bank of Australia (RBA)
The RBA announced a package on 19 March 2020 that will put downward pressure on borrowing costs for households and businesses.
The RBA is supporting small businesses as a particular priority. It announced a term funding facility for the banking system.
Banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 per cent. This will reinforce the benefits of a low cash rate by reducing funding costs for banks, which in turn will help reduce interest rates for borrowers.
To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs.
Quick and efficient access to credit for small business
The Government is providing an exemption from responsible lending obligations for lenders providing credit to existing small business customers.
This exemption is for six months, and applies to any credit for business purposes, including new credit, credit limit increases and credit variations and restructures.
Supporting non-ADI and smaller ADI lenders in the Securitisation market
The Government is providing the Australian Office of Financial Management (AOFM) with $15 billion to invest in structured finance markets used by smaller lenders, including non-Authorised Deposit-Taking Institutions (Non-ADI) and smaller Authorised Deposit-Taking Institutions (ADI).
This support will be provided by making direct investments in primary market securitisations by these lenders and in warehouse facilities.
More information on these measures is available here
For more information please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au