SME Loan Guarantee Scheme: How many businesses have been approved, and do you fit the bill for phase 2 and 3?

By Katherine O'Chee · · 3 min read
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With phase two of the government’s SME Loan Guarantee Scheme in full swing and phase three just released, businesses across Australia now have plenty of opportunity to access cheaper funding to boost their cashflow. 

Under the first phase, the government guaranteed half of all unsecured three-year business loans of up to $250,000. But under phase two which is set to run until 30 June 2021, the loan terms have been extended to five years, and loan amounts increased to $1 million, with 39 lenders including the Commonwealth Bank and ANZ participating in the scheme. 

Phase three, known as the SME Recovery Loan Scheme, has also begun as of 1 April 2021, with the caps for loan amounts and loan terms once again raised to $5 million and 10 years. 

Treasurer Josh Frydenberg said more than 35,000 business loans - over $3 billion of the planned $44 billion - have so far been provided to small to medium-sized enterprises (SMEs) under the scheme.

And with over 350,000 businesses now left without JobKeeper payments to cover staff costs, even more may jump on board and apply for a government-backed loan.

What to expect from phase two and three

While phase one was focused on assisting small businesses with short-term survival amid the pandemic, phase two was designed to help SMEs shift gears to longer-term investment.

The Australian Financial Review (AFR) reported that another key difference with phase two is that the government capped the interest rate at just over 10% , following reports that some lenders were charging scheme borrowers rates as high as 18%. 

But while lower interest rates could benefit some industries, it may exclude others, said the Australian Finance Industry Association’s chief executive, Diane Tate. 

“For example, fit-outs for restaurants, cafes or event spaces, some equipment used in gyms, and some IT equipment frequently used in offices in our cities and regional centres, will likely be out of scope,” she told the AFR. 

However, “if you’re a manufacturing, mining, construction, transport or agriculture business who wants to use, say, a three- or five-year loan to purchase a motor vehicle or other high-quality assets, this is good news.” 

To be eligible for phase two, you must be a small to medium-sized business with a turnover of up to $50 million (this includes sole traders and not-for-profits). 

Now with phase three also in the mix, even lower rates capped at around 7.5% may be on the table for eligible businesses, thanks to the government’s decision to guarantee 80% (instead of 50%) of loans from participating lenders.

For instance, the Commonwealth Bank recently announced that their new rates will be up to 75 basis points better than its government-backed loans from last year. 

To be eligible though, you’ll need to either have been on JobKeeper between 4 January and 28 March 2021 with a turnover of less than $250 million, or have been affected by the recent NSW and Queensland floods. Your application must also be approved before 31 December 2021. You'll still be eligible even if you've accessed loans in phase one and two.

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Last updated 28 July 2025Important disclosures

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