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

May 14th, 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 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. 

To find out what your business can do to improve cash flow during COVID-19, click here.


Non-bank lenders, on the other hand, are used to providing fast finance to small businesses, often under more relaxed terms and circumstances than the bigger banks. For instance, non-bank lender loss rates are generally predicted at around 4% to 6%. By comparison, the major banks’ losses are predicted at below 0.4%. Essentially this means that banks only take on borrower’s who pose them little to no risk when it comes to defaulting or bankruptcy. 

Non-bank lenders therefore often mitigate this loss by charging higher interest rates for ‘riskier’ borrowers. While charges are higher than the bigger banks in these instances, these are often borrowers who would have otherwise been turned away by the larger lending institutions entirely. 

So, when it comes to loans amidst the coronavirus outbreak, it might be a good idea to consider where your business stands financially, your credit score, and how likely you are to be accepted for certain types of finance. It is also worth considering just how quickly your business requires a loan (generally speaking, bank loans take longer to process than non-bank loans, and require more paperwork). 

Final thoughts

Before applying for any form of business finance, it’s also always a good idea to speak to your lender directly. A lender can advise and guide you, as well as explain your likelihood of being approved for finance before you submit an application. This could mean keeping a rejected claim off of your credit file.

If you would like to learn more about invoice finance with Earlypay to see if it's right for your business, please contact our team today on 1300 760 205.

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].