Changes to the government’s SME lending scheme open the door to fintechs... but not all the way

As of today, changes to the government’s COVID-19 SME lending guarantee are coming into effect.

And, while the second phase is intended to encourage more take-up from small business owners, it could also open the door for more fintech and alternative lenders to get involved.

First announced back in March, the scheme offered up $40 billion in new, short-term, unsecured loans, with a government guarantee of 50%.

For lenders providing credit to existing SME customers, the government also issued a temporary exemption from responsible lending obligations, meaning small business owners could access cash more quickly and efficiently.

But, the scheme didn’t exactly take off.

In reality, six months later, less than $2 billion has been lent out under the scheme. And, Commonwealth Bank and NAB have been responsible for more than 80% of that.

Of the 44 lenders approved under phase one, more than three quarters are banks.

As reported in SmartCompany earlier this week, the loans scheme wasn’t working for many SMEs, with business owners suggesting the banks were quizzing them on the value of their assets or offering interest rates that were just too high.

At the same time, some banks noted lower than expected appetite from small businesses, simply because the program didn’t suit SMEs very well.

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Source: Changes to the government’s SME lending scheme open the door to fintechs… but not all the way