Online lenders warn small business loan program could miss target

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Australian online lenders have seen little use of the federal government’s revamped $ 40 billion small business guarantee program, raising concerns that the stimulus will benefit small and medium-sized businesses.

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

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

Treasurer Josh Frydenberg expanded the SME guarantee scheme. Credit:Alex Ellinghausen

Guy Callaghan, managing director of Banjo, one of the 44 lenders approved by the government under the program, said he had so far made a “very low” number of loans under the program.

The small business sector, often underserved by large banks, has increasingly turned to online lenders to meet its financing needs. However, Mr Callaghan said online lenders were at a disadvantage compared to the big banks because they did not have access to the same cheaper financing and accordingly warned that the SME guarantee scheme was not gaining popularity.

“I think he probably missed the mark where everyone who calls us is calling in the hope of getting very cheap financing rather than the government backing 50% of the loan,” he said.

“So they call and they are very disappointed because they are expected to have reduced prices and we are looking at our cost of funding which has not changed at all.”

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

“It’s been a bit of a Catch 22, the big banks have had access to lower cost financing, but they are more risk averse, so they don’t lend the same way, they can’t access data and they don’t can’t get comfortable unless you have a property, “he said.” Until we can access that cheaper financing, I think there is a fiction in the market on the popularity of the program. ”


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