RBA leads Australian banks to throw $100B lifeline to SMEs

Australian banks have joined forces to support SMEs to survive the economic impact of COVID-19 (coronavirus) and, hopefully, head off a recession. The Reserve Bank of Australia has led the charge and the Australian Banking Association has followed.

As the Federal and State Governments work on additional economic stimulus measures to mitigate the impact of the COVID-19 pandemic on Australians and businesses, banks have come to the party with a Small Business Relief Package to support small businesses.

Australian Banking Association CEO Anna Bligh has today announced a small business relief package from Australia’s banks, providing a welcome relief to businesses affected by COVID-19.

“This Assistance Package will apply to more than $100bn of existing small business loans and depending on customer take up, could put as much as $8 billion back into the pockets of small businesses as they battle through these difficult times,” Ms Bligh said.

Ms Bligh highlighted that “Small businesses are the most vulnerable part of the economy and present the most pressing need for assistance. This is a multi billion dollar lifeline for small businesses when they need it most, to help keep the doors open and keep people in jobs.”

Ms Bligh also revealed banks were putting in place a fast-track approval process to ensure customers receive support as soon as possible.

“Small businesses employ 5 million Australians and this package is designed to help them keep doing just that.

“Small businesses can rest assured that if they need help, they will get it. Banks are already reaching out to their customers to offer assistance and packages will start rolling out in full on Monday,” Ms Bligh stated.

So what is your bank doing for small business? Here’s what the big four have pledged so far:

Commonwealth Bank

Commonwealth Bank CEO Matt Comyn has outlined a range of measures and support available to customers and businesses in response to the spread of coronavirus (COVID-19), saying “These are unprecedented times, and they call for unprecedented measures.”

Small Business: Offering a 1 per cent interest rate reduction for all existing cash-linked small business loans. This is on top of the bank committing last week waive merchant fees, redraw fees, and early redraw fees on business term deposit accounts, and deferring repayments on vehicle and equipment finance loans.

Measures are also available for home mortgage interest rate reductions, repayment reductions, and an increased interest rate for savings account holders.

Recognising the importance of small business cash flow, CBA has also committed to prioritising payments for SME suppliers and moving more SME suppliers to immediate payment terms.

National Australia Bank

NAB CEO Ross McEwan has committed the bank’s support, saying “NAB is open for business. As many of our customers deal with the growing challenges of COVID-19, our priority is clear: to support you in any way we can.” NAB’s range of measures for business and personal customers.

Small Business: Able to defer principal and interest for up to six months on a range of business and equipment finance loans; a 2 per cent cut on loans and overdrafts; an additional 1 per cent reduction on variable loan rates, on top of the 0.25 per cent reduction earlier this month.

NAB is also providing up to $65 billion of additional secured limits to pre-assessed customers, with $7 billion currently available for fast assessment process, up to $9 billion in additional limits for unsecured lending for existing customers, and deferral of business credit card repayments.

Home owners can pause loan repayments for up to 6 months, fixed interest rates are lowered, and savings account holders will receive an increased interest rate.

Westpac

Westpac ‘s COVID-19 Customer Support Package includes:

Small Business: Assistance support includes a 2 per cent reduction on overdrafts and a 1 per cent reduction on small business cash-based loans, together with the option to defer business loan repayments for up to 6 months.

Westpac is also offering reduced rates and repayment relief for home loan customers, and a special term deposit offer for investors, together with specialist call centre help for elderly customers to access telephone and internet banking.

ANZ Bank

Launching the bank’s COVID-19 package, ANZ Chief Executive Officer Shayne Elliott said: “Our package supports Australian business and the people who work for them. We understand the impact this crisis is having and ANZ will play a major role in backing Australia’s economy and our customers through these challenging times.

Elliott continued “We have been working with both the Federal Government and our regulators to keep money flowing through the economy and we’ll do all we can to keep businesses afloat and Australians employed, as well as reducing the financial pressure on households.

Small Business:  Assistance includes a reduction is small business loan interest rates by a further 0.25 per cent, resulting in a 0.5 per cent total reduction; temporary increases in overdraft facilities for 12 months, and a 6 month repayment deferral on fixed term loans.

Assistance is also available for home loan customers, with reductions in variable interest rates and a six month home loan repayment deferral.

Reserve Bank of Australia

The big-four banks’ assistance packages follow the Reserve Bank’s decision on 19 March to slash the official interest rate out of cycle to a record low of 0.25 per cent.

RBA Governor Philip Lowe committed to “building a bridge” to move the Australian economy from the current crisis towards economic recovery, and the rate cut was supported by a number of additional measures to lower funding costs and encourage banks to provide credit to businesses, especially SMEs.

RBA Lowe announced the RBA will buy Australian government bonds and provide a three-year funding facility. Although reluctant to call it a quantitative easing (QE) program, the RBA highlighted its objective of providing support for low funding costs across the entire economy.

The RBA is offering banks $90 billion in funding and has incentivised banks to loan to SMEs. For every extra dollar lent to large business, lenders will have access to an additional dollar of funding from the RBA, but for every extra dollar of loans to SMEs, they will have access to an additional five dollars.

Lowe said “Our major focus is to support jobs, incomes and businesses, so that when the health crisis recedes the country is well placed to recover strongly. Supporting small business over coming months is a particular priority.”

BridgePoint Group is well set to ensure your business gets the most out of the additional bank programs and stimulus packages.

Reach out so we can help you get your business entitlements while you get on with your business. Contact BridgePoint Group’s Mitchell Turnbull on 1300 656 141.

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