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Can non-bank lenders save SMEs amid the coronavirus crisis?

By The Skippr Team on 15 May 2020

With a lack of confidence in traditional banks mounting, could the non-bank lenders help Aussie businesses to keep their heads above water?

In a time of uncertainty, it’s hard to know who to rely on. This time last year, 33% of Aussies reported a loss of faith in the banks as a result of the Banking Royal Commission. As of 5 May 2020, Treasurer Josh Frydenburg announced that banking reforms recommended by the royal commission would be delayed to allow banks to deal with the coronavirus outbreak

It therefore goes without saying that many small business owners looking for assistance from the banks during the coronavirus outbreak might be fearing imminent disappointment - or have already been met by it. And while the Australian Government’s Coronavirus SME Guarantee Scheme seems like a guiding light amidst the current economic darkness, how much can we rely on the big banks to help our small businesses in this time of need?

With more customer-owner banks, non-bank and fintech lenders being approved for the scheme, is there a better option when it comes to acquiring business finance during COVID-19? In this article we discuss how the scheme works, which customer-owner or non-bank lenders are currently participating, and how you can make the best decision when applying for business finance.

The Coronavirus SME Guarantee Scheme explained

The Coronavirus SME Guarantee Scheme is a part of the government’s second-wave stimulus package aimed at helping Aussies survive the impact of COVID-19, announced on 22 March 2020.

Businesses struggling as a result of the coronavirus pandemic are able to access government backed business loans via approved lenders. Loans under the scheme:

  • Are available up to $250,000
  • Do not require security
  • Have terms of up to three years
  • Require no repayments for the first six months
  • Have no interest charged on unused funds

To qualify for finance for the scheme, businesses must have an annual turnover of less than $50million and be facing hardship as a direct result of the outbreak. 

Which lenders are are participating in the Coronavirus SME Guarantee Scheme?

Lenders participating in the Coronavirus SME Guarantee Scheme consist of a combination of banks, customer-owned banks and non-bank lenders.

Customer-owner banks
Non-bank lenders
  • ANZ
  • Bank of Queensland
  • Bendigo and Adelaide Bank Ltd
  • Commonwealth Bank of Australia
  • Get Capital
  • Heritage Bank Limited
  • Hume Bank Limited
  • IMB Bank
  • Judo Bank Pty Ltd
  • Laboratories Credit Union
  • Liberty Financial
  • Macquarie Bank
  • MyState Bank Limited
  • National Australia Bank Limited
  • Queensland Country Bank Limited
  • Suncorp
  • Unity Bank
  • Westpac
  • Australian Mutual Bank 
  • Bank Australia
  • Bank of Us
  • Community First Credit Union
  • First Choice Credit Union
  • Goulburn Murray Credit Union
  • Heritage Bank
  • Illawarra Credit Union
  • Police Credit Union
  • Queensland Country Bank
  • Regional Australia Bank
  • South West Credit Union
  • Summerland Credit Union
  • The Capricornian
  • Unity Bank
  • Banjo
  • Prospa
  • GetCapital
  • Lumi
  • Moula
  • OnDeck
  • Speedy Finance
  • Spotcap
  • Tyro Payments Limited

*All data was sourced from treasury.gov.au and was accurate as of 13/05/2020

What's a customer-owned bank?

Customer-owner banks, also known as credit unions or mutual banks, are banks of which the shareholders are its customers. Generally, customer-owned banks put their profits back into providing better rates and fees for their customers. 

What's a non-bank lender?

The term ‘non-bank lender’ generally refers to lenders that are not ADIs (Authorised Deposit-Taking Institutions). This means that they cannot accept deposits from members, e.g. current accounts or term deposits. 

Banks vs non-banks - where should I apply?

Unfortunately, there's no cut and dry response to this question. This is because your answer will likely depend on the unique financial circumstances of your business. 

However, business owners should be aware that while loans under the Coronavirus SME Guarantee Scheme are designed to help businesses that are struggling as a result of pandemic, the bigger banks have stated that they are not available to businesses that may have been facing earlier financial issues.

Commonwealth Bank group executive of business and private banking Mike Vacy-Lyle stated on the subject:

“There are unfortunately going to be some businesses that we end up saying no to. For a business that was in difficulty pre-coronavirus, we cannot use a coronavirus guarantee to help that business.” 

How a pre-existing difficulty will be determined by the banks is uncertain, but it may prove problematic for businesses in need of finance who naturally face factors such as seasonal cash flow fluctuation, or those who have less than perfect credit histories. 

A comprehensive guide to equipment finance

By The Skippr Team on 12 May 2020

Your guide to the different forms of equipment finance and how they could benefit your business.

What is invoice factoring and how does it work?

By The Skippr Team on 8 May 2020

Everything you need to know about invoice factoring and whether it’s right for your business

Invoice finance can be a great way to unlock capital tied up in your unpaid invoices. There are two main types of invoice finance: Invoice factoring and invoice discounting. While similar in nature, there are some notable differences. Find out more about invoice factoring below, how it differs from invoice discounting, and whether it’s right for your business. 

How to support your business’ cash flow during COVID-19

By The Skippr Team on 6 May 2020

5 helpful ways to maintain cash flow for small businesses during the coronavirus pandemic

Cash flow for Australian businesses has already taken a hit en masse as a result of the recent pandemic. And unfortunately, many businesses are predicting the situation only to worsen in the near future.

What is invoice discounting and how does it work?

By The Skippr Team on 16 April 2020

Understanding invoice discounting, how it differs from invoice factoring, and whether it’s right for your business.

Invoice discounting is a form of invoice finance. Invoice finance, also known as debtor finance or accounts receivable finance, is a common way for growing businesses to fund increasing working capital requirements, by unlocking the capital tied up in unpaid invoices. 

The risk of high customer concentration for Australian small businesses

By The Skippr Team on 7 April 2020

Winning a big new customer is exciting and has many obvious benefits for a small business. But an over-reliance on one or a few big customers also comes with risks that business owners need to be aware of and manage accordingly.

What is Debtor Finance and how does it work?

By The Skippr Team on 6 March 2020

Everything you need to know about debtor finance and how it could benefit your business.

Typically, the tightest month of the year for Aussie businesses is February. With Xero Small Business Insights reporting just 47% of Australian small businesses having positive cash flow, on average, over the past five years. February is a tough month for businesses, as invoices tend to be paid later than in other months. It’s also a time when to fork out for stock top ups post Christmas period. All factors which can contribute to a negative working capital. 

Business Finance with the Xero App Marketplace

By The Skippr Team on 24 February 2020

More and more Australian small businesses are sold on the benefits of cloud accounting software and are making the move. Easy-to-use platforms like Xero save small business owners time and effort with bookkeeping and provide useful information to help with better decision making. Cloud accounting software has been a game changer for millions of business owners in how they run their business, and a lesser known benefit is that it can help Australian small businesses access business finance more simply than in the past. 

What is invoice finance and how does it work?

By The Skippr Team on 3 February 2020

You may have heard of invoice finance and how it can be a great option for businesses looking for some extra cash flow to support growth. In this blog we answer the two big questions: What is invoice finance and how does invoice finance work? 

Invoice Finance and Cloud Accounting Software: A match made in heaven!

By The Skippr Team on 17 January 2020

The use of cloud accounting software by small businesses is skyrocketing. On 30 September 2019, Xero had 1.2 million subscribers in Australia and New Zealand alone, which was a 28% increase on the previous year. MYOB, Quickbooks and other accounting software businesses are also quickly improving their online products and growing fast.