Business loans supported by the Government’s SME Guarantee Scheme

The SME Guarantee Scheme is a new Scheme initiated by the Australian Federal Government that supports small businesses by guaranteeing credit facilities of up to $250,000 issued by participating lenders to eligible smaller businesses across Australia who may be experiencing lost or deferred revenues, leading to disruptions to their cashflow. The Scheme supports a range of business finance products, including term loans and lines of credit, to support current and upcoming cash flow needs.

It’s important that borrowers are aware that they will remain liable for the repayment of loans provided by lenders under the Scheme. This is because the Guarantee under the Scheme is provided to the lender (eg Prospa), not the small business owner, and doesn’t impact a borrower’s obligations under the loan.

Please note that this Scheme is just one of a number of measures announced by the Federal Government and you can find full details of the available measures at www.business.gov.au.

How long will the Scheme run for?

The Scheme is available for loans approved by 30 September 2020.

When can I access the Scheme?

The Scheme is available for eligible loans approved by 30 September 2020. Eligible applicants can apply for funding supported by the Scheme through Prospa, as we have been selected to participate in the Scheme alongside other approved financial institutions. If your loan is approved under the Scheme, you will be made aware of this in your loan documentation.

How can I access the Scheme?

You can access the Scheme through Prospa, as we have been selected to participate as a lender in the Scheme.

Prospa offers an easy application, fast decision and funding possible in 24 hours. If you need help please call us on 1300 882 867 and one of our friendly staff can help you – but please remember, telephone lines are likely to be busy.

Will the Scheme funds run out so I can’t access the Scheme?

The Government has allocated a total of up to $40 billion under the Scheme. Each approved lender received its own allocation and top-ups may be available depending on demand. The Scheme will be available for eligible loans approved by 30 September 2020.

Do I need to evidence that I have a viable business?

Yes. In order to obtain access to Prospa funding under the Scheme, you must be able to show that were it not for the COVID-19 pandemic, your business would be considered viable, and Prospa must believe the provision of finance will enable your business to trade out of any short-to-medium term difficulty. We will look at your past 12 months trading history and ask you some questions to help us determine viability.

How do I know if I’m eligible to apply?

Smaller businesses (SMEs) from all sectors can apply for a Prospa Back to Business Loan or a Back to Business Line of Credit, both supported by the Scheme.

To be eligible for a credit facility under the Scheme, your business must:

• Be a small business with annual turnover of less than $50 million
• The business must be registered and operating in Australia under a valid ABN
• Funding must be used for business purposes only
• Funding must be used to support current and upcoming cash flow needs (including working capital, liquidity and operating expenditure)
• Funding cannot be used to refinance existing finance with Prospa or any other lender
• The total sum of your funding supported by the Scheme (including funding from other financial institutions) must not exceed $250,000

In addition to the above criteria, you must have a business which, were it not for the COVID-19 pandemic, Prospa would consider lending to, and which we believe the provision of finance to will enable to trade out of any short-to-medium term difficulty.

I have an existing loan/line with Prospa, am I eligible?

Existing customers are eligible under the Scheme, if you meet the eligibility criteria and noting that only new loans are eligible under the Scheme. You are not able to refinance, extend or increase your current facility under the Scheme, including any refinance with Prospa or any other participating lender.

What types of businesses is the Scheme for?

The Scheme is designed to support smaller businesses who are otherwise considered viable to access vital funding to get through the impact of the COVID-19 pandemic. Eligible businesses from any industry sector can apply. You must meet the criteria including having an annual turnover of less than $50 million.

Are sole traders eligible?

Yes, as long as they have an ABN, business activity is operated through a business bank account and they meet the eligibility criteria. The scheme is open to eligible sole traders, partnerships, companies and trusts with business activity in Australia, with annual turnover of less than $50 million, operating in all industry sectors.

I am getting other kinds of support to help respond to COVID-19 – can I still get a loan?

Access to other Government initiatives will not automatically rule out your eligibility for Prospa funding under the Scheme. We will primarily form a view of your business viability based on your trading history prior to COVID-19 ie up until 1 March 2020. We may take into account the other forms of Government support that you may be benefiting from, for example the JobKeeper program or rent relief, when making our assessment.

What are the key features of Scheme?

The Scheme guarantees unsecured credit facilities for eligible small businesses up to a maximum amount of $250,000 on terms of up to three years, with no repayments for the first 6 months.

The Scheme provides Prospa with a Government-backed Guarantee for a portion of the outstanding facility balance including principal and interest.

As a small business owner, you will benefit from no repayments for the first 6 months.

Lenders may only take personal guarantees as security.

It’s important that borrowers are aware that they will remain liable for repaying the loan. The Guarantee under the Scheme is to the lender (Prospa), not the small business owner.

What can I use funding for?

Funds supported by the Government’s Coronavirus SME Guarantee Scheme can only be used for business purposes and for application to support current and upcoming business cash flow needs including working capital, liquidity and operating expenditure. This could include buying equipment, hiring equipment, marketing, purchasing inventory, working capital and hiring employees.

Funding supported by the Scheme must be a new loan (rather than an increase or extension to an existing loan) and cannot be used to refinance existing finance with Prospa or any other lender.

What are the fees to borrow under Scheme?

No fees will be payable in the first 6 month no repayment period. The following fees will become payable after the end of the first 6 months:

Back to Business Loan: 2% Service Fee on the loan amount, which will be capitalised and become payable in instalments following the end of the grace period.

Back to Business Line of Credit: $35 Monthly Service Fee applies over the entire term, which will accrue during the first 6 months. The accrued monthly service fees will become payable in weekly instalments over the first 26 weeks after the end of the grace period, along with the regular monthly service fee which will be payable in arrears each month over the entire remaining term.

Will I need property security to get a Scheme-backed loan?

The Scheme is specifically designed to be used for unsecured lending for facilities of up to $250,000. Only personal guarantees will be taken as security, meaning that borrowers will not have to provide an asset as security for the loan.

How fast will I get a decision?

We currently expect that our usual application turnaround times will continue to apply to funding supported by the Government’s Coronavirus SME Guarantee Scheme.

Under normal circumstances, we can often provide a response in one hour – as long as you apply during standard business hours and allow us to use the advanced bank verification system link to instantly verify your bank information online. If you choose to upload copies of your bank statements we can provide a decision in as little as one business day.

How fast will I get the money?

We currently expect that our usual speed of disbursing approved funding will continue to apply to funding supported by the Government’s Coronavirus SME Guarantee Scheme.

Under normal circumstances, if you apply before 4pm on a business day and your application is approved, it is possible to have money in your account the next business day.

How much can I borrow?

The total amount of your loan will depend on the specific circumstances of your business. We consider a variety of factors to determine the health of your business and based on this information, Prospa may be able to provide you with funding. Our standard products offer funding up to $300,000. Funding supported by the Government’s Coronavirus SME Guarantee Scheme is up to $250,000 for eligible customers.

How do you charge for a standard Prospa business loan?

When you apply for our business loan, we will assess the risk profile of your business in accordance with our lending policies and provide you with a customised offer including loan amount, term and interest rate. Interest rates vary based on things like your industry, how long you’ve been in business, and the health of your cash flow.

When you take out a standard business loan with Prospa, the only fee you will incur is an origination fee. There’s no compounding interest, no additional costs for early repayment and no additional fees (as long as you make your payments on time). You’ll also know exactly how much you need to pay and when from day one.

A standard Prospa Line of Credit has a line activation fee and a monthly subscription fee.

The fee structure for Prospa funding supported by the Government’s Coronavirus SME Guarantee Scheme is different – please call us on 1300 882 867 for further information.

How do repayments work?

To help you avoid missing repayments we offer repayments that fit in with your cash flow cycle – either daily or weekly. These are automatically deducted from your nominated business account.

Will my information be protected with Prospa?

Protecting your information, and being clear about how we collect, use, exchange and protect your information, is of huge importance and a vital part of our relationship with you. View our Privacy Policy.

Is it safe to link my bank account to the Prospa platform?

Yes. We use industry recognised encryption standards to protect your personal, sensitive and financial data and are ISO27001 certified, validating our commitment to customer data security and privacy. We use an advanced bank verification system link to instantly verify your bank account information online so we can provide a fast response.

Do I need security to access funds?

Prospa considers the health of a business to determine creditworthiness. For Prospa’s standard Small Business Loans or Business Lines of Credit, no asset security is required upfront to access Prospa funding of up to $100,000.

If you continue to meet your obligations under the facility, such as payment obligations (as detailed in your contract), security will never be required. For facilities over $100,000, or where your combined exposure to our products exceeds $100,000, Prospa takes security in the form of a charge over your assets.

With Prospa funding supported by the Government’s Coronavirus SME Guarantee Scheme no asset security is required for amounts up to $250,000. However personal guarantees will be required.

You can apply for a Prospa Small Business Loan or Business Line of Credit if you:

• are an Australian Citizen (or permanent resident)
• are over 18 years, own an Australian business (with a valid ABN/ACN)
• can demonstrate 24 months of trading for a new business (or 3 months if you have purchased an existing business)

To be eligible for a Prospa credit facility supported by the Government’s Coronavirus SME Guarantee Scheme you must meet the following criteria:

• Be a small business with annual turnover of less than $50 million
• The business must be registered and operating in Australia under a valid ABN
• Funding must be used for business purposes only
• Funding must be used to support current and upcoming cash flow needs (including working capital, liquidity and operating expenditure)
• Funding cannot be used to refinance existing finance with Prospa or any other lender
• The total sum of your unsecured relief funding (including funding from other financial institutions) relating to COVID-19 must not exceed $250,000

In addition to the above criteria, you must have a business which, were it not for the COVID-19 pandemic, Prospa would consider lending to, and which we believe the provision of finance to will enable the business to trade out of any short-to-medium term difficulty.

Prospa continues to responsibly lend to new and existing customers. If you’re applying for Prospa funding under the Scheme, you’ll need to demonstrate monthly turnover figures and that you have been trading for at least 24 months. You also need an active ABN, your business bank account details and drivers licence details. We may also need to see business financials for larger loan amounts.

How to get a business loan?

If you need flexible finance for business, we are Australia’s #1 online lender to small business and we may be able to help. Our dedicated customer support team will understand your business and find a finance solution to suit your circumstances. We work with Australian small business owners from NSW to QLD, Victoria to WA and everywhere in between to take the hassle out of business loans.

Unlike traditional lenders, we don’t require the usual pages of reports, financial statements and business plans when you apply. Instead, we offer a quick online application with a fast decision and funding possible in 24 hours. You only need up to 12 months of bank statements, your ABN and a drivers licence to get started.

If you’re concerned about being baffled by banking jargon, we’ve simplified our loan application process so there’s no more complex terminology around cash flow, low interest loans, fixed rate loans versus variable rates, the loan term, terms and conditions and whether you are in a position to refinance in the future. It’s simple and easy to understand with Prospa.

With Prospa you’ll have a clear understanding of what’s expected, how much your set repayments will be, whether they’re daily or weekly, when they’ll be due, the total amount you’ll pay back by the end of your loan, and your payment options.

Call 1300 882 867 to get started on your business loan application today.

What are alternatives to a business loan?

There are a number of options you can explore when you want to compare business financing options. Here are some to think about:

Invoice factoring: This type of finance is also known as invoice finance. It allows small businesses to receive part of their outstanding invoices immediately to help cover costs. It is usually used to maintain cash flow short-term. Prospa doesn’t offer invoice factoring, however if you do need help with your cash flow or a way to boost working capital, then a Prospa loan could be just what you need.

Equipment financing: Equipment loans are a way to finance purchases of equipment for your business. This type of finance is usually secured against the value of the business asset you wish to purchase. This can sometimes help to secure a low rate, although this isn’t always the case. So, if you need to purchase business machinery, IT equipment, tools, or even work vehicles, a Prospa business loan could be a good alternative to equipment finance.

Vehicle finance, Business car loan, Machinery finance: This can be a handy way of updating your fleet vehicles or to cover the cost of large assets like harvesters, excavators, commercial cookers, etc. A Prospa small business loan may be able to cover these items, talk to us today to find out more.

Business overdraft: Also known as a business line of credit, this handy type of finance can help small businesses cover short-term cash flow gaps. It is often used to cover bills like payroll which can fluctuate if you employ seasonal casuals. It’s also useful to pay suppliers on time if you’re waiting for your own invoices to be paid by your customers.

Do you need a deposit for a business loan?

Some commercial loans require a deposit. And while you don’t need a deposit to apply for a business loan with Prospa, it is a good idea to have a clear understanding of all of your finances before you apply. It’s OK if you don’t have pages and pages of financial analysis to reference. We understand that small business operators are up against it and often struggle to keep up with the paperwork. To apply for up to $150,000, you only need up to 12 months of bank statements, an ABN and your drivers licence

Do business loans rely on personal credit checks?

Like traditional lenders, Prospa conducts credit checks to look at your personal credit score in conjunction with your business health. Credit reporting bodies will compile a report on your credit worthiness based on a range of factors which include how many loan applications you have already made, your current credit if you have any, any overdue bills, past bankruptcy if applicable and any pending writs or court judgments.

At Prospa, we don’t rely solely on your personal credit score, we focus on evaluating the health of your business. We have developed a complex credit assessment tool which takes into account over 450 separate pieces of information. It’s unique to Prospa and allows us to take the time to really understand how your business operates and what loan amount will be the most applicable to your business’s long-term stability.

If you apply for a loan of $5,000 to $150,000, you need to demonstrate up to 12 months of trading history through bank statements. If you need $150,000 to $300,000 we’ll require additional financials like a P&L statement. If you are ready to find out how much you can borrow and ready to find a better way to finance your business, contact a member of our friendly customer service team today on 1300 882 867 or fill out a quick and hassle-free online form.