Online lenders warn SME loan scheme may miss the mark

Online lenders warn SME loan scheme may miss the mark

Australian online lenders have seen little uptake of the federal government’s revamped $40 billion small business guarantee scheme, raising concerns the stimulus measure won’t benefit small and medium businesses.

Only 15,600 business loans worth $1.5 billion have been issued out of the $40 billion available under the scheme announced in the March stimulus package with banks and the government committing $20 billion each.

The government last week announced it would revamp the scheme, allowing banks to provide low-interest rate loans for terms of up to five years with the maximum loan amount increased from $250,000 to $1 million. However, online lenders say the improved terms may not lead to businesses flocking to the scheme.

Guy Callaghan, chief executive of Banjo, one of the 44 lenders approved by the government under the scheme, said it had so far issued a “very low” number of loans under the scheme.

The small business sector, often under-served by the big banks, has increasingly turned to online lenders to meet its funding needs. However, Mr Callaghan said online lenders were disadvantaged compared to the big banks because they did not have access to the same lower priced funding and warned as a result the SME guarantee scheme was not gaining traction.

“I think it has probably missed the mark where all the people who call us, call in the expectation they can get very cheap funding rather than the government backing 50 per cent of the loan,” he said.

“So they call and they get very disappointed because the expectation has been put out there that there is discount pricing and we look at our cost of funding which hasn’t changed at all.”

Mr Callaghan added if fintechs were able to access cheaper funding and pass that on to small businesses the scheme would be a “no brainer”.

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Source: Online lenders warn SME loan scheme may miss the mark