Australia’s banks welcome the expansion of the coronavirus loan scheme

Australia’s banking industry has welcomed the federal government’s new version of the small business coronavirus loan scheme.

The federal government has extended its coronavirus loan scheme, with major changes set to assist businesses still financially wounded from the pandemic.

Treasury announced on Thursday the third phase of the coronavirus SME Guarantee Scheme, which will provide longer-term loans to firms that are yet to rebound from the economic downturn.

The new loans of up to $5m have a repayment period of up to 10 years, and the federal government will guarantee 80 per cent of the loan instead of the bank.

Government guarantees assist in reducing red tape for small business to acquire new debt funding.

Australian Banking Association chief executive Anna Bligh has welcomed the third version the scheme, saying it is the “right product for the times”.

Australian Banking Association chief executive Anna Bligh has welcomed the third version of the scheme. Picture: Bianca De Marchi/ AAP.

“The new phase of the scheme will make more businesses eligible and allow banks to provide more funding and support to businesses, particularly those still doing it tough,” Ms Bligh said.

“It includes more flexibility and will allow small businesses to restock, rebuild and recover.”

Phase three is only available to businesses still receiving JobKeeper payments.

SME Guarantee 3.0 is being hailed as the transition package once the JobKeeper subsidy program ends on March 31.

Businesses eligible will be able to refinance any existing loan, and the scheme will also include a loan repayment holiday of 24 months.

Commonwealth Bank is in favour of the package and said it would provide stable support to the economy beyond the pandemic.

CBA has provided more than half of the assistance through the SME Guarantee Scheme, which equates to roughly $2bn of loans issued.

CBA chief executive Matt Comyn says it’s important to help those businesses who have yet to get back on their feet. Picture: Adam Yip

“While many sectors of the economy are now benefiting from the strong recovery, it is important that we continue to support those businesses who have yet to get back on their feet,” CBA chief executive Matt Comyn said.

“This latest loan guarantee initiative will also help to provide low-cost finance for SMEs to invest in their businesses, grow jobs and take the opportunities afforded by the recovery.”

NAB chief executive Ross McEwan added the phasing out of JobKeeper made the expansion of this package even more important.

“The longer dated terms doubling to a maximum 10 years will be really helpful to businesses that were healthy pre-COVID but struggling in the current conditions,” Mr McEwan said.

ANZ’s top boss Shayne Elliott noted the scheme’s extension would help businesses in the tourism and travel sector to gain assistance while operations continued to be impacted.

Westpac chief executive Phil King has also publicly welcomed the recovery loan program.

Originally published as Australia’s banks welcome the expansion of the coronavirus loan scheme