Prospa Group Ltd (ASX: PGL) shares have leapt over 25% this morning after the online lender announced it had been granted access to the federal government's SME Guarantee Scheme. The scheme is designed to help small businesses deal with the impact of coronavirus over the next 6 months.
Government guarantee
This morning Prospa announced it had received access to the scheme, which provides selected lenders with a government-backed guarantee. The government will guarantee 50% against the outstanding facility balance of eligible products.
Prospa has received an allocation of $223 million under the scheme. This can be applied to all eligible new lines of credit and loans issued by Prospa between 14 April 2020 and 30 September 2020. The guarantee allows Prospa to provide small businesses with up to $250,000 in unsecured funding for up to 3 years and a 6 month repayment holiday with interest to be capitalised at the end of the 6 month period.
CEO Greg Moshal said, "it's fantastic to see the Government understands what small businesses need right now to survive. Prospa has always focused on small businesses and access to this Scheme will empower us to support thousands of small businesses during this difficult time."
Prospa's business
Prospa is an online lender offering small business loans of $5,000 to $300,000. Prospa listed in June 2019 at an issue price of $3.78. Shares reached a high of $4.60 in August 2019, but lost ground later in the year when it reported revenue for CY2019 and 1HFY20 would be below prospectus forecasts.
Prospa shares were trading at around $2 in February. The March market crash caused Prospa shares to fall to just 50 cents, but they have since rallied and are currently trading at 95 cents. Prospa withdrew its FY20 guidance in March, citing the adverse impact of coronavirus on originations.
The company nonetheless remains well funded with committed funding lines from a range of domestic and international senior and junior funders. At 31 December 2019, Prospa had $102.5 million in cash and cash equivalents and $485 million in available third party facilities.
