Coronavirus SME Guarantee Scheme

The Australian Government recognises that the way out of the COVID-19 recession hinges on the strength of small businesses.

In a bid to further help SMEs navigate economic uncertainty caused by the pandemic, the Australian Government has extended the Scheme. As a result, on October 1st, the Coronavirus SME Guarantee Scheme entered Phase 2 and will be in effect until June 30th 2021. 

The aim is to provide additional and thorough support for businesses in recovery and alleviate the damage caused by COVID-19.

The extension of the Scheme is a positive development and will offer loans to small and medium-sized businesses, sole traders, and non-profits.

Treasurer Josh Frydenberg stated that Phase 2 is meant to, “help businesses move out of hibernation, successfully adapt to the new COVID-safe economy and invest for the future.”

Differences Between Phase 1 and Phase 2 of the Coronavirus SME Guarantee Scheme

Phase 1 of the Coronavirus SME Guarantee Scheme has been criticised for its inadequacy – only 15,600 business loans worth $1.5 billion were granted.

One of the reasons for the disappointing results is that non-bank lenders like fintechs were not able to offer cheap loans to SMEs. Instead, only ADIs (authorised deposit-taking institutions) had access to cheaper funds. However, ADIs have significantly more onerous servicing requirements than fintechs, which is quite possibly why they didn’t approve many loans.

The maximum loan amount has increased in Phase 2 from $250,000 per borrower to $1 million. Also, the maximum loan term is extended from three to five years (with an option to have the repayments deferred for the first six months).

The other reason why uptake was so low in Phase 1 has to do with the unwillingness of businesses to take on debt due to economic uncertainty. That is, SMEs can’t predict how possible lockdowns will affect their ability to make repayments on their loans.

The Managing Director of Tradeplus 24, Adam Lane claims that the adjustments make the Scheme appeal to a wider scope of lenders.

Australian small and medium-sized businesses face difficulties to secure loans under $1 million without using property as security. However, the government has recognised this by ensuring that lenders offer these loans on an unsecured basis if required. Borrowers can opt to secure these loans with property security if they wish to reduce the applicable interest rate.

To sum up the differences, Phase 2 of the Coronavirus SME Guarantee Scheme goes beyond the first phase and includes:

  • A wider array of borrowing purposes
  • Lenders can offer a repayment deferral period
  • Loans can be either secured or unsecured
  • The maximum loan amount is $1 million per borrower

These loans provide crucial liquidity injection to businesses. According to Adam Lane, “before COVID hit, Australian businesses were already faced with a $90-billion credit funding gap.”

This presented a stifling impediment to their growth.

Also, the good news is that businesses that received funding in Phase 1 are eligible for additional loans in Phase 2.


Phase 2 of the Coronavirus SME Guarantee Scheme is a good opportunity for small businesses to grow during the COVID-19 pandemic. Businesses are encouraged to look around and compare loan terms from different eligible lenders.

However, it’s imperative that you seek advice from a reputable and accredited finance broker before getting into debt.

Aviator Advisory has been helping clients with applications to keep their businesses growing and expanding during the COVID pandemic and resultant lockdowns. We help our clients in preparing, structuring and negotiating favourable loan terms with accredited lenders.

Get in touch with us to see if the SME Guarantee Scheme will assist your business’ expansion and/or recovery.

Disclaimer: The information provided herein is for general information purposes only and does not constitute specific advice. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific advice should be obtained from a suitably qualified professional before adopting any investment/financial strategy.