Online lenders warn SME loan scheme could miss the mark

Australia’s online lenders have seen little uptake of the federal government’s $40 billion small business guarantee scheme, raising concerns that the stimulus may not benefit small and medium-sized businesses.

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

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

Treasurer Josh Frydenberg expanded the SME Guarantee program. Credit:Alex Ellinghausen

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

The small business sector, often underserved by big banks, is increasingly turning to online lenders to meet its financing needs. However, Mr Callaghan said online lenders were at a disadvantage compared to big banks as they did not have access to the same funding at a lower price and warned that the SME guarantee scheme was not gaining popularity.

“I think he probably missed the mark where all the people calling us expecting to be able to get very cheap financing rather than the government backing 50% of the loan,” he said.

“So they call and they’re very disappointed because there’s an expectation of reduced prices and we’re looking at our cost of finance which hasn’t changed at all.”

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

“It’s been a bit of a catch 22, the big banks have access to cheaper funding, but they’re more risk averse, so they don’t actually go out to lend in the same way, they can’t access data and they can’t feel comfortable if you don’t have property,” he said. “Until we can access this cheaper funding, I think there is a fiction in the market about the popularity of the program.”

Comments are closed.