Australian banks are set to defer repayments of small business loans for six months, for SMEs affected by the ongoing COVID-19 crisis.
The Australian Banking Association (ABA) today released a small business relief package, suggesting struggling small business owners will be let off their loan repayments for the time being.
ABA chief Anna Bligh said the relief will likely apply to more than $100 billion in existing small business loans.
In a statement, she estimated that, depending on take-up, it could return “as much as $8 billion back into the pockets of small businesses”.
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The package is intended to support small businesses during the continuing economic downturn as a result of the spread of COVID-19.
It’s intended to help them stay open and operational for as long as possible, and to keep staff in jobs, Bligh said.
Businesses will have to apply for the deferrals, but banks are implementing fast-track approval processes, in a bid to offer support as soon as possible.
The announcement comes just a day after the federal government and the Reserve Bank announced a total of $105 billion in loan facilities for banks and non-bank lenders, to incentivise them to issue credit to small and medium businesses.
The ABA has also been working closely with the government on this measure, Bligh said.
“Small businesses are the most vulnerable part of the economy and have the most urgent need for assistance,” she said.
Speaking to SmartCompany, Council of Small Businesses of Australia (COSBOA) chief executive Peter Strong said this is “an extraordinary announcement from the banks”, offering small businesses “exactly what was needed”.
“People are hitting really difficult mental spaces, the worry has been unbelievable,” he said.
“It sends a great message,” he adds.
“You can concentrate on other things now, knowing that for six months you do not have a repayment.”
We’re still lacking some detail as to what constitutes a business being ‘affected’ by the COVID-19 crisis.
But, it appears the definition is flexible, Strong explains, “which is even more wonderful”.
At the same time, he urges businesses looking to apply for these deferrals to be patient.
“There’s nothing worse than hanging on a helpline for hours … but this sort of help means [banks] are going to get a lot of calls,” he says.
“Read a book while you’re waiting. Do a bit of work. Cook a pie.”
Ultimately, in the sea of bad news for small businesses, this could be a lifeline, Strong says.
“It doesn’t solve everything. But it’s good news.”