Big boost for small business: The Australian government’s Coronavirus SME Guarantee Scheme explained

Brokers have seen the impact COVID-19 can have on their clients’ and their own businesses – cash flows slowed, spending plans slashed, business plans disrupted, and finance applications deferred.

To compound things, the difficulties many small businesses may face when attempting to access finance have been ratcheted up further, as many lenders slowed the flow of credit due to a softer economic environment.

Invaluable government support

On March 22, the federal government unveiled the Coronavirus SME Guarantee Scheme to maintain the flow of credit to small businesses and help stimulate the economy.

“The scheme covers up to $40 billion of lending to small businesses until 30 September and provides selected lenders – including non-banks like Prospa – with a government-backed guarantee of 50 per cent for eligible new loans and lines of credit,” Prospa’s co-founder and chief revenue officer, Beau Bertoli, explains.

Prospa was selected as one of five initial non-bank lenders to participate in the scheme, receiving an allocation of up to $223 million applicable to all eligible new loans and lines of credit issued between 14 April and 30 September 2020.

As Mr Bertoli points out, the government’s decision to include non-bank lenders in the scheme “demonstrates how important the sector is for promoting competition, driving innovation and securing financial inclusion for more Australian small businesses”.

Keeping SMEs open for business

Designed for smaller businesses that are considered viable for the longer term, eligible businesses with annual turnover below $50 million can access up to $250,000 in unsecured funding, for terms of up to three years, from selected lenders.

Additionally, they receive much-needed breathing space in the form of an initial six-month no-repayment period.

“We’re committed to responsibly funding small businesses not just when things are good, but when things are tough, too,” says Mr Bertoli.

“The scheme empowers us to support thousands of small businesses impacted by COVID-19 and to help get Australians back to work and back to business. Our credit decision engine enables us to make fast decisions, and we know better than most what a good small business looks like.”

The funds can be used by borrowers to support current and upcoming cash flow needs such as wages, rent and bills.

“As businesses start to reopen, they may need funds to purchase stock or buy equipment. We’ve had businesses that are using this time for fit-outs and need funding to make that happen, and of course some sectors are experiencing increases in demand like online retailers and transport due to the spike in deliveries,” Mr Bertoli says.

“The government has also increased the instant asset write-off from $30,000 to $150,000 to help stimulate the economy, so we also anticipate seeing small businesses taking advantage of this in the lead-up to the end of the financial year.”

Who’s eligible?

Prospa is rolling out its new products offered as part of the scheme: the Prospa Back to Business Loan and Line of Credit products, which will be made available through distribution partners.

There are some additional eligibility requirements for small businesses to qualify for these products, including that applicants will need to demonstrate they have been trading for 24 months and the products cannot be used to refinance existing debt.

As per Prospa’s standard products, businesses must be registered and operating within Australia, have a valid ABN, and the funding must be used to support current and upcoming cash flow needs – including working capital, liquidity and operating expenditure.

Bertoli notes, however, that established funding options also remain available.

“Choice is important, and we continue to offer our Business Loan and Line of Credit products alongside our government-supported products,” he says.

Empowering brokers

Since its foundation in 2011, Prospa has been a strong supporter of brokers.

“As trusted advisers to small business, brokers play a vital role in growing awareness and consideration of non-bank lenders and delivering the best outcomes for their clients. We have over 10,000 partners, and this community will be crucial in helping us support the small-business economy over the next few months and beyond,” says Mr Bertoli.

Given many brokers are themselves small-business owners, he says Prospa continues to assist them, too:

“We’ve invested in technology to allow our national account management team to engage with partners, helping them understand the changing SME lending environment and what it means for their businesses in future.

“We also continue to provide marketing and education resources to support partners, including partner-branded landing pages to simplify the referral process.

“Things are constantly changing and brokers are incredibly busy – we want to make their lives easier. Even with our entire team and partners working remotely, we’ve been able to continue offering the same level of support. As a cloud-based fintech, we’re agile and set up for this digital world.”

The power of working together

Like all working engines, the engine room of our economy – small business – needs fuel, and that fuel is money.

“We’ve watched our customers grow their small businesses into franchises, expand overseas, create jobs and profit and make a huge difference in their communities every day,” says Mr Bertoli.

“Over the years, we’ve had a sixth-generation painter and decorator business that was able to keep on around 17 employees because of his Prospa loan. We also had a customer who ran a tea business and used a loan to develop an export business into Korea.”

To date, Prospa – with the help of its broker partners – has funded almost 27,000 small businesses across Australia and New Zealand, with tangible benefits for the wider economy.

“Research from RFi Group and the Centre for International Economics revealed that every $1 billion in lending by us has generated a corresponding flow of money through the economy, leading to a $4-billion increase in GDP and 57,000 jobs maintained,” Mr Bertoli explains.

“The research also showed that 82 per cent of customers said their most recent Prospa loan resulted in an increase in revenue. That’s the kind of help that Australia needs right now!”

Find out how Prospa can support your SME clients under the Coronavirus SME Guarantee Scheme. Speak to your Prospa BDM today, call 1300 964 808 or visit www.prospa.com/partners

The information in this post is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.

Written by Prospa

Last Updated: 14 March 2022

Published: 10 June 2020