Raising the cap from $250,000 to $1 million could benefit up to 3.5 million companies as the focus of the scheme switches from working capital to investment loans.

Loan tenures will be extended from three to five years under a program slated to run until June next year.

Prime Minister Scott Morrison said there was cause for optimism despite the grim state of the economy.

"I just don't want Australia to survive the COVID recession, I want us to emerge strongly from it," he told reporters in Sydney on Monday.

"We're not a country that just survives, we're a country that always seeks to thrive."

Treasurer Josh Frydenberg said businesses would be able to use the loans to buy machinery, purchase fit-outs or make other investments.

"If reflects the fact that small businesses are the backbone of our economy," he told Sky News.

"They're going to be a key part of our recovery."

He said 15,500 businesses had been loaned $1.5 billion through the program, which is guaranteed 50-50 between the government and banks.

"We're giving them access to more money at lower rates and for longer periods," Mr Frydenberg told the Nine Network.

Shadow treasurer Jim Chalmers said the initial scheme was grossly under-subscribed.

"The second attempt by the Morrison government at its SME guarantee scheme needs to do a much better job of supporting small businesses than the first one did," he said.

But Labor is expected to support the scheme.

The prime minister is confident businesses will make sound decisions about taking on debt through the loan scheme.

"They will be looking sensibly at what their commercial opportunities are and then they'll make those judgements," Mr Morrison said.

Small Business and Family Enterprise Ombudsman Kate Carnell is urging companies to only borrow money from Australian Financial Complaints Authority members.

"Not all lenders are AFCA members - in fact many are not - and small businesses need to be aware of the risks," she said.

"Access to funding continues to be a major issue for small businesses. It's crucial they make the right choices when it comes to managing their finances."

Australian Associated Press