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Non-banks appointed to SME guarantee scheme

by Hannah Dowling13 minute read
Non-banks appointed to SME guarantee scheme

Several non-bank lenders have been announced as official participants of the government’s SME guarantee scheme, providing up to $250,000 in unsecured loans to small businesses.

Following the government making first-round offers to participating lenders and NAB announcing its new NAB Business Support Loan for the Coronavirus SME Guarantee Scheme, several non-bank lenders have also now confirmed that they are taking part in the federal government’s guarantee scheme.

The SME Guarantee scheme will support up to $40 billion in lending to small and medium-sized enterprises (SMEs), including sole traders and non-profit organisations, in a bid to help them assist Australia’s small businesses navigate the economic impact of the COVID-19 outbreak.

Under the scheme, the government has pledged to guarantee 50 per cent of all new SME loans written by eligible lenders, until 30 September 2020, provided that:

  • The SME (or sole trader) has an annual turnover of up to $50 million
  • The maximum loan size is capped at $250,000 per borrower
  • Loans terms are up to three years, with an initial six-month repayment holiday
  • Borrowers will not be required to provide an asset as security for the loan

Additionally, as part of the loan products available, the government will encourage lenders to provide facilities to SMEs that only have to be drawn if so needed by the SME. 

This will mean that the SME would only incur interest on the amount they draw down. If they do not draw down any funds from the facility, no interest will be charged, but they will retain the flexibility to draw down funds should the need arise.

First participating non-bank lenders announced

Last week, the government made offers to 29 banks and five non-banks, in response to lenders providing expressions of interest, which totalled $34 billion in potential lending to SMEs.

The Treasury stated that non-bank lenders were free to submit an EOI. However, they would be held to greater scrutiny than bank lenders.

Additionally, non-bank lenders were “unlikely” to be allocated funds under the scheme if they proved to have less than $50 million in assets and/or limited pre-existing SME lending experience.

Despite this, several non-bank lenders have now announced their official participation in the scheme.

Online lender Prospa has announced that it is an officially named participating lender in the scheme after having received an allocation of up to $223 million, which can be applied to all eligible new lines of credit and loans issued by Prospa between 14 April and 30 September 2020.

Under the scheme, Prospa has stated it will be providing eligible small businesses with access to up to $250,000 in unsecured funding for up to three years with no upfront fees, and an initial six-month repayment holiday with interest to be capitalised at the end of the six-month period.

The lender has stated it is taking expressions of interest from SMEs looking for funding through the scheme, effective immediately.

Propsa CEO and co-founder Greg Moshal welcomed the announcement, noting the importance of sustaining Australia’s SME sector throughout the pandemic period.

“It’s fantastic to see the government understand what small businesses need right now to survive,” Mr Moshal said.

“Prospa has always focused on small businesses, and access to this scheme will empower us to support thousands of small businesses during this difficult time.

“The more access small businesses have to working capital, the better it is for the economy.

“The government’s response has been swift and considered, and we look forward to doing our part in providing essential funding to the small-business community,” he concluded.

Prospa co-founder and chief revenue officer Beau Bertoli emphasised the significant role that the broking industry will play in the rollout of the government’s initiative and Prospa’s “unique” placement to implement the initiative via its distribution network.

“The broker community will be crucial in helping us reach and support as many small businesses as possible,” Mr Bertoli said. 

“This funding could be a lifeline for their customers, and I encourage brokers to contact the Prospa team with their scenarios to see if we can help.” 

He concluded: “We also know that many brokers are small-business owners, too, and recognise this is a tough period for most. We’re committed to supporting our partners and their customers in any way we can.”

Liberty has also been announced as a participating lender in the Coronavirus SME Guarantee Scheme, and launched a dedicated program – Liberty Business Care – to run eligible loans through.

According to Liberty, for eligible loans written under the scheme, there will be no fees payable on committed but undrawn amounts under the loan.

Additionally, the loan will feature redraw capabilities and be secured with personal guarantees of relevant individuals rather than assets.

James Boyle, CEO of Liberty, welcomed the lender’s participation, noting its experience and understanding of small business lending.

“We are pleased with our appointment so that we can extend our accumulated experience to further support individuals, households, businesses and our economy at this critical time,” Mr Boyle said.

Liberty also noted the important role that brokers will play in the implementation of this scheme and its effectiveness in assisting SME clients.

“Due to the unsecured nature of this loan, we look forward to partnering with our accredited brokers to help eligible small businesses get the funding they need,” he said.

“The Australian broker industry has our commitment that we will continue to make vital funding available to support our valued customers during this testing period,” Mr Boyle said. 

Participating lenders are being approved on a rolling basis, with a Treasury spokesperson informing The Adviser that a full list of participating lenders will be released “once approved”.

[Related: NAB launches new SME offering]

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Hannah Dowling


Hannah Dowling is a journalist for The Adviser and Mortgage Business.

Prior to joining Momentum Media, Hannah worked as a content producer for a podcast catering to property investors. She also spent six years working in the real estate sector at a local agency. 

Email Hannah at: [email protected]