Bigger, longer-term loans backed by the government will be made available to small business, under an extension of a lending plan that has so far been greatly under-subscribed.
Ahead of Thursday’s economic update ‘mini-budget’, Treasurer Josh Frydenberg unveiled an upgrade of the federal government’s ‘Coronavirus SME Guarantee Scheme’.
The plan, announced in the early days of the COVID pandemic, saw the government act as guarantor on bank loans to small and medium businesses, allowing them to borrow money at lower rates to pay bills.
“The next phase of the Coronavirus SME Guarantee Scheme will help businesses move out of hibernation, successfully adapt to the new COVID-safe economy and invest for the future,” Mr Frydenberg said on Monday.
Small business will now be able to borrow up to $1 million, up from the previous cap of $250,000, with the loan period to be kicked out to five years from the current three.
Another big change is that businesses will be able to apply for loans for purposes “beyond working capital, such that a wider range of investment can be funded”, Mr Frydenberg said.
“They’re going to get access to more money, for a longer period, at lower rates,” he told Sky News.
Mr Frydenberg initially said in March that the first phase of the scheme would “support up to $40 billion of lending to SMEs” – but on Monday he gave an update that the plan had so far seen businesses accept loans of just $1.5 billion.
When asked on Sky about the low takeup rate, the Treasurer defended the scheme by saying it was initially “confined to working capital” and that the new phase would see the government “expanding the use for which the money can be put”.
Mr Frydenberg said the loan plan was intended to encourage small business to “adapt and innovate during the coronavirus crisis.”
The first phase of the SME scheme is open until September 30, with the newly announced phase to be open from October 1 to the end of next June.
Elsewhere on the government’s economic plate, Mr Frydenberg seemingly confirmed that eligibility criteria around JobKeeper would be tightened on Thursday.
He hinted that tweaks would likely see an end to the arrangements by which some number of employees may be receiving more under the flat $1500 per fortnight wage subsidy than they would in a normal working week.
The JobKeeper framework was scheduled to wind up by the end of September, but the new COVID lockdowns in Victoria have piled pressure on the government to extend that deadline, especially for businesses in tourism and entertainment that will be crippled by the pandemic for some time to come.
The government will also reveal its plans for the JobSeeker welfare payment, which is set to revert to its pre-pandemic level within months.