Australian banks are expanding their program of six-month loan deferrals to larger companies, offering relief on up to $250 billion in business borrowing.
The major banks are backing the Australian Banking Association’s (ABA) extended Business Support Package to 98% of all businesses with a loan from an Australian bank, increasing the existing $3 million small business threshold to loans of up to $10 million, which accounts for an additional $100 billion of business loans.
ABA CEO Anna Bligh said the new measures, combined with previously announced ones, mean a six-month deferral of loan payments will apply to up to $250 billion worth of loans, with extra cash available to 425,000 businesses to cope with the crisis during the COVID-19 pandemic.
The relief package has been developed in consultation with regulators APRA and ASIC and is subject to authorisation from the ACCC.
The banks have also put pressure on landlords to be kinder to their tenants, saying they will back them through the COVID-19 crisis on the condition that commercial property landlords commit not terminating leases or evicting current tenants for rent arrears due to coronavirus-related issues.
Bligh said expanding the threshold to $10 million will apply to commercial landlords of properties such as local shopping centres, pubs, clubs and restaurants.
“This will help protect many more thousands of small businesses from being evicted if they are struggling to pay the rent as it covers approximately 90% of commercial property owners who have loans with an Australian bank,” she said.
“Where landlords within this threshold do the right thing by their tenants, banks will do the right thing by them.”
For the next six months, the banks have also agreed to not enforce business loans for non-financial breaches – such as changes in valuations – of the loan contract.
The new measures apply on an opt-in basis, under other conditions. including that:
- the customer has advised that its business is affected by COVID-19
- the customer was current in terms of existing facilities 90 days prior to applying
- interest is capitalised – meaning either the term of the loan is extended or payments are increased after the deferral period.
Businesses with total loans of more than $10 million may also be eligible for relief on a case-by-case basis, Bligh said.
“When combined with the previous small business assistance announced just over a week ago, this means $250 billion worth of loans covered are able to access a six month deferral of payments, which means dollars staying in the pockets of businesses throughout this crisis,” she said.
Westpac Chief Executive Business Guil Lima said the bank’s expanded Business Relief Package offered immediate assistance to help customers in need.
“These are unprecedented times and they call for strong, meaningful actions. With this extension we are now able to offer access to these support measures to 98% of Westpac’s Business Bank customers if they have been impacted by COVID-19,” he said.
The deal also applies to Westpac brands St.George, Bank of Melbourne and BankSA.
Lima said Westpac’s support package will include:
- Repayment relief to defer principal and interest repayments of eligible business loans for six months (with interest to be capitalised) for businesses with a total lending exposure up to $10 million
- Unsecured three-year term loan up to $250,000 for new and existing business customers with turnover of less than $50 million
- Zero establishment fee for standard equipment finance loans until the end of June 2020
- Refunding the merchant terminal rental fee for up to 3 months
- Fee free redraws where permitted under the loan and subject to approval
- Restructuring and consolidating loans
- Access to term deposit funds without reduction in the interest rate
- Deferred payments for Business Credit Cards for 3 months.
Customers can contact their relationship manager for more information, or apply online.