Australian challenger bank Judo will now have an extra $500 million to distribute in loans to small businesses amid the coronavirus pandemic, coming directly from the government, The Sydney Morning Herald reported.
Of that sum, $250 million will be invested by the government into the Judo Bank lending warehouse, through the Australian Office of Financial Management’s (AOFM) Australian Business Securitisation Fund. That will make Judo Bank the first to receive money from the project.
The Business Securitisation Fund was announced in late 2018 as a way to support small and medium-sized businesses (SMBs). The initiative was intended to increase competition between big banks and, at the same time, add new options for businesses struggling to get loans.
The other $250 million will come from the recently established Structured Finance Support Fund, which was announced on March 19 as a way to help mitigate the effects of the pandemic that has forced layoffs.
The funding is crucial right now, as assistance to businesses “has never been more important,” said Judo Bank Co-Founder and Co-Chief Executive David Hornery.
Judo has been in possession of a full banking license since May of last year. Hornery said the bank’s demand was high and their deposit book currently sits at $1.4 billion. The bank recently received a $350 million line of credit from Citi.
Hornery said the government’s aid was nevertheless a positive thing that would be “substantial and targeted” in helping to deal with the economic fallout of the coronavirus.
The first chunk of funding is expected to be available immediately and the AOFM will see funds funneled in from Prospa, Zip and Flexigroup, among other FinTechs. Despite the office saying it would call for a second round of proposals before July 1, it now says it will reassess the condition of the markets early that month before any further actions are taken.
The coronavirus pandemic has destabilized the world’s economy, forcing large swathes of businesses to close their doors, resulting in layoffs and economic turmoil.