(02) 8824 7485 This email address is being protected from spambots. You need JavaScript enabled to view it.
Integrity, Innovation & Commitment
Support For Flow Of Credit

Support For Flow Of Credit

  • Thursday, 02 April 2020 14:35

GOVERNMENT CREDIT GUARANTEE FOR UNSECURED SME BORROWING

The Government has announced the Coronavirus SME Guarantee Scheme, whereby it will provide a guarantee to Small and Medium Enterprise (SME) lenders of 50% for new unsecured loans to be used for working capital. SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • the maximum total size of loans of $250,000 per borrower.
  • the loans will be up to three years, with an initial six-month repayment holiday.
  • the loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes. The Government states that they expect lenders will look through the cycle to sensibly consider the uncertainty of the current economic conditions.

The Government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME. If offered, this will mean that the SME will only incur interest on the amount they draw down.

The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

COMMERCIAL AND RESIDENTIAL TENANCIES

The National Cabinet has agreed to a moratorium on evictions over the next six months for commercial and residential tenancies in financial distress who are unable to meet their commitments due to COVID-19.

MAKING IT EASIER FOR SMALL BUSINESSES TO ACCESS NEW CREDIT, CREDIT LIMIT INCREASES, AND CREDIT VARIATIONS AND RESTRUCTURES

The Government will exempt lenders from the responsible lending obligations for a period of six months in relation to the credit they extend to their existing small business customers, provided there is an existing borrowing relationship and some proportion of that credit is used for business purposes. The exemption will apply to new credit, credit limit increases and credit variations and restructures. The government anticipates that this reform should help small businesses get access to credit quickly and efficiently. It may however depend on the lender and the small business. Contact your lender for further information.

ASSISTANCE TO SMALL BUSINESS FROM BANKS

Businesses with total business loan facilities of up to $10 million can defer repayments for loans attached to their business for six months. During this period banks have agreed to not enforce business loans for non-financial breaches of the loan contract (such as changes in valuations).

The conditions on accessing this deferral are:

  • For commercial property landlords, they provide an undertaking to the bank that for the period of the interest capitalisation, they will not terminate leases or evict current tenants for rent arrears as a result of COVID19.
  • 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.

SUPPORT FROM THE RESERVE BANK OF AUSTRALIA TO ENCOURAGE MORE LENDING BY BANKS

The Reserve Bank of Australia (RBA) has announced a term funding facility for the banking system. Banks will have access to at least $90 billion in funding from the RBA at a fixed interest rate of 0.25%. To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs. The Australian Prudential Regulation Authority (APRA) has also announced temporary changes to its expectations regarding bank capital ratios.

SUPPORT FOR SMALLER LENDERS

The Government, through the Australian Office of Financial Management (AOFM) will invest up to $15 billion into the markets used by smaller lenders to support their lending. The AOFM will be using the money to purchase residential mortgage backed securities from smaller lenders, as well as assets that support small business lending and consumer lending.

FOR MORE INFORMATION

Please refer to the SUPPORTING THE FLOW OF CREDIT FACT SHEET from The Treasury for further details.

 

 

Let us advise you with your accounting and taxation needs!