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Important Information regarding Australian Banks' Support for Customers
Government's Coronavirus SME Guarantee Scheme
The Government will provide a guarantee of 50% to SME for new Unsecured Loans, which will help businesses access funding easier because the Government promised to repay the bank 50% of the loan if the borrowers default on the loan under this Scheme.
The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
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.
The interest rates on these Unsecured Loans is expected to be around 4.5% to 5.0% p.a. which is un-precedented. *Unofficial information - To be confirmed
On a side note, Secured (by a property) Business Loans' interest rates are getting as low as 2.59% (fixed) which is in line with the recent Home Loan fixed rates reduction from the banks.
Important note:
*We have been waiting for further details from the banks since last week. Please check again for new updates regarding:
- Which businesses are eligible (how long have you been in business, major banking institutions, financial performance, etc.)
- Assessment process (what kind of information is required for application and how much can you borrow)
- Application process (how quickly can you get funding)
- Product details
* The 50% guarantee provided by the Government is not free money. If you default on the loan, the Government will likely try to recover the funds from you. This is only our speculation, and we will update you once there is further official information.
Regarding repayment deferrals' impact on credit history
As mentioned in our previous post, repayment deferrals' should have minimal impact on your credit file. I quote APRA's comment below.
"Where a borrower who has been meeting their repayment obligations until recently chooses to take up the offer not to make repayments as part of a COVID-19 support package, the bank need not treat the period of the repayment holiday as a period of arrears. Similarly, loans that have been granted a repayment deferral as part of a COVID-19 support package need not be regarded as restructured."
An updated list of participating banks in supporting client experiencing hardship due to the economic impact of COVID-19.
Make sure you check the latest media releases for information and contact details of departments which are more relevant to the current situation, rather than the standard hardship contact details.
As always, please do not hesitate to contact us directly if you need help.
Kind regards,
Kien Phan & Phuong Nguyen.
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