If you haven’t heard yet, changes in the small business loan guarantee by the government now allow small businesses to not just survive through the COVID-19 pandemic but to also grow the business.
The $40bn small business loan guarantee, which forms part of the economic rescue package framed as “safety package” by the Morrison government, will now allow small businesses to expand their operations rather than just pay for regular expenses.
Small Business Loan Guarantee Changes
The changes include guarantee provisions for loans up to $1m starting October 2020 for five-year terms. It was only $250,000 for three-year terms, initially.
Meant to reduce business loan interest rates from about 9.5% to 4.5%, the small business loan guarantee was undersubscribed from the beginning. With the subsequent announcement of the JobKeeper, small businesses might have found the fortnightly wage subsidies of $1,500 per employee more attractive than a loan scheme.
At present, only 15,600 loans worth a total of $1.5bn were issued which meant, fortunately for you, that more was in the offing. You can take advantage of this in the second phase which is set to start on 1 October 2020 and end on 30 June 2021.
Business Groups Welcome the Expansion
Industry leaders applaud the government’s decision to expand the small business loan guarantee. The expansion means small businesses will now have access to more credit and for a longer time.
The president of the Commercial and Asset Finance Brokers Association of Australia, David Gandolfo, said the lower uptake of the scheme was due to the fact that it would only augment cash flow and it limited businesses from investing and growing.
Gandolfo said that the previous guarantee, the same credit risk guidelines were applied by Australian banks in assessing borrowers. The changes now allow for a more secured lending, making borrowers more attractive to banks.
The chief executive of the Council of Small Business Organisations of Australia, Peter Strong, said the changes were a “good decision”.
Strong believed that small businesses focused on availing of the JobKeeper before because everyone was looking to survive rather than to grow.
“Now they’ve got a better handle on what’s happening, and what’s in front of us, we’re seeing now there are people out there seeing [an] opportunity to do things they couldn’t do before,” Strong said.
The chief executive of the Commonwealth Bank, Matt Comyn, said the change was “a welcome development by the government as it provides small businesses with access to a deeper and long-term pool of financial support which will be necessary to help underpin the recovery and provide [small and medium enterprises] with the confidence to plan and invest for the future”.
Frydenberg said the government would “continue to support small businesses as they seek to rebuild, adapt and create jobs on the other side of the coronavirus crisis”. May the changes in the small business loan guarantee allow for all that.
Need more info on the small business loan guarantee? Get in touch with us. We can also assist you with financial planning to help you achieve your personal and business financial goals faster. Contact us today.
Need advice from a financial professional? Contact a Chan & Naylor specialist here.
Aside from financial services, have a look at our other accounting and advisory services designed to help you achieve greater financial success.
If you like this article, “Small Business Loan Guarantee: Now more than just a cash flow help,” subscribe to our newsletter and stay in touch with us by liking our main Chan & Naylor Facebook page, as well as our Linkedin, Instagram, and Twitter pages.
The Chan & Naylor Group has national offices in South West Sydney, Sydney, Pymble and Parramatta in New South Wales, Wheelers Hill, Melbourne, Moonee Ponds and Hawthorn in Victoria, Brisbane and Capalaba in Queensland, and East Perth in Western Australia that can assist you with your accounting needs. Contact us here today.