# Government Assisted Financing Schemes For Small Businesses
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-02-02
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Covid-19 Relief Schemes for SMEs: A Lifeline Amid Economic
Meta Description: Discover how small businesses are coping with the economic toll of the pandemic and the relief schemes available to aid SMEs in distress.
URL: https://financedigest.com/government-assisted-financing-schemes-for-small-businesseshtml

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Covid-19 has exacted havoc and financial pain across the globe. Aside from poorer regions and countries where access to vaccines is limited, small businesses everywhere are also bearing an inordinate economic toll and hardship.

As governments across the world muster resources to cope with the impact of Covid-19 on livelihoods and healthcare, there have also been robust responses by many central governments to help small businesses cope with the pandemic.

Hit by waves after waves of enforced closures and furloughs, SMEs (small and medium enterprises) in certain sectors such as travel, events and food and beverages are the [hardest hit](https://www.financedigest.com/digital-divide-hits-rural-black-americans-hardest.html "‘Digital divide’ hits rural Black Americans hardest"). Even SMEs who are in industries that are better placed to cope with remote working might still find it stressful to cope with reduced aggregate demand, [supply chain](https://www.financedigest.com/5-steps-to-successful-supply-chain-finance.html "5 Steps to successful supply chain finance") disruptions and constant Covid-19 regulatory changes.

SMEs form a critical segment of many economies, as they typically form the largest fraction of firms and employ a [significant number](https://www.financedigest.com/turkey-courts-the-worlds-golfers-as-tourism-numbers-rise-significantly.html "Turkey courts the world’s golfers, as tourism numbers rise significantly") of workers. Unfortunately, most [SMEs also tend to be concentrated in front facing](https://www.financedigest.com/smes-facing-an-uncertain-future.html "SMEs facing an uncertain future") industries, such as F&B and retail. These industries are usually directly affected by many countries’ [Covid-19 public health responses](https://www.financedigest.com/stocks-with-greater-socially-responsible-investor-demand-saw-weaker-losses-during-the-covid-19-crash.html "Stocks with greater socially responsible investor demand saw weaker losses during the COVID-19 crash"), such as enforced closures or social distancing measures.

Thankfully, many countries have rolled out much [needed relief schemes and programmes to aid SMEs](https://www.financedigest.com/what-needs-to-happen-to-improve-the-landscape-for-smes-trying-to-access-finance-options-in-the-uk.html "What needs to happen to improve the landscape for SMEs trying to access finance options in the UK") in distress to provide succour. Wage relief schemes, debt moratoriums and rental waivers are some solutions governments introduced to cushion the impact of Covid-19 for [small businesses](https://www.financedigest.com/small-businesses-run-out-of-cash-before-they-run-out-of-potential.html "Small businesses run out of cash before they run out of potential").

These aid and relief schemes differ from each [country and the scope and extent of assistance provided](https://www.financedigest.com/patsnap-partners-with-wipo-to-provide-developing-countries-with-access-to-rd-analytics.html "PatSnap partners with WIPO to provide developing countries with access to R&D analytics") as a percentage of GDP varies as well. A concern with the good intentions of such schemes would be the execution. The target recipients of such relief schemes are largely SMEs. However, the eligibility and accessibility to aid could be bogged down by bureaucracy and [red tape](https://www.financedigest.com/increasing-regulatory-red-tape-promptsa-new-approachto-trading-data-management-among-fs-firms.html "Increasing regulatory red tape prompts a new approach to trading data management among FS firms").

Smaller firms tend to be less sophisticated than their larger counterparts and could [face difficulties accessing and interpreting information on the various government](https://www.financedigest.com/estonias-pro-kyiv-government-faces-election-test-amid-cost-of-living-crisis.html "Estonia’s pro-Kyiv government faces election test amid cost of living crisis") relief grants and schemes available to them. It is imperative that any aid relief schemes rolled out should reach the intended recipients expeditiously sans red tape and hurdles. These schemes should not only [benefit the largest of SMEs](https://www.financedigest.com/5-benefits-of-iso-9001-certification-for-smes.html "5 Benefits of ISO 9001 Certification for SMEs") only, which are typically staffed with inhouse accountants, financial controllers and consultants.

Some of the more popular and effective aid relief schemes introduced by governments to help SMEs are government [aided financing](https://www.financedigest.com/how-decentralized-finance-can-aid-in-the-acquisition-process.html "How Decentralized Finance can aid in the acquisition process") schemes. The Monetary Authority of Singapore and Enterprise Singapore (a statutory board) has made available [government assisted financing schemes](https://smeloan.sg/government-loan/) with various features to help Singapore SMEs at different stages of their growth as well as to improve access to financing amid the pandemic. The basic purpose and mechanism of these loans are to encourage SME lending via government risk sharing with [credit](https://www.financedigest.com/credit-union-loans-in-high-demand.html "Credit Union Loans in High Demand") guarantees on a certain percentage of loans underwritten by participating financial institutions.

In Australia, the government has also rolled out similar government guarantee loan schemes for SMEs, such as the [SME Recovery Loan Scheme](https://treasury.gov.au/coronavirus/sme-recovery-loan-scheme). This provides for a 50% [government guarantee on loans underwritten by participating lenders](https://www.financedigest.com/uk-lenders-trial-government-backed-loans-for-risky-borrowers.html "UK lenders trial government-backed loans for risky borrowers") till June 2022.

These government assisted financing schemes provided a life buoy to eligible SMEs who are not as well capitalised as larger corporates. With easier [access to credit and financing](https://www.financedigest.com/700000-employees-across-the-uk-have-access-to-fair-finance-will-reach-one-million-employees-in-2017.html "700,000 Employees Across The UK Have Access to Fair Finance, Will Reach One Million Employees in 2017"), these loan programmes helped SMEs with a buffer on temporary cash flow stress caused by Covid-19.

Together with the various other government funded support schemes, these policy tools helped SMEs [weather the pandemic storm and prevented what could have been an even bigger economic](https://www.financedigest.com/how-digital-commerce-merchants-can-weather-the-economic-storm.html "How Digital Commerce Merchants Can Weather the Economic Storm") disaster for SMEs in the absence of such aids and relief programmes.

**Produced in Association with Craig Lebrau**


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