31 March 2020 3:50pm

The ABA has announced a number of relief packages for small businesses suffering due to the economic and social impacts caused by the coronavirus pandemic.

Read our latest updates here.

Key takeaways

  • The ABA has announced further measures to help small businesses on 30 March.
  • Key updates mean a new, larger range of businesses will qualify for assistance.
  • These benefits will help small business with real cash retention measures.
  •  Qualifying loan facilities will increase from $3 million to $10 million.
  • The amount of business loans able to defer repayment has been increased to $250 billion.
  • An additional 425,000 business to now qualify for the scheme.
  • An agreement to not enforce non-financial breaches of loan covenants will apply to all sectors of the economy.
  • Is provided on an opt-in basis.
  • We here at KPMG Australia recognise the critical role small businesses play in the Australian community.

As the physical distancing measures that the government has implemented in response to the coronavirus (COVID-19) have become increasingly restrictive, the ABA has announced that the SME banking relief package will be further extended. Through broadening the criteria by which businesses will be eligible under the scheme it is expected that 98 percent of all businesses with an Australian bank loan will be able to seek a 6 month deferral of loan repayments.

As a result of the expansion of the scheme, there are a greater range of businesses that qualify. As this is being applied on an opt-in basis it will be important for SMEs to take advice on the suitability of the scheme for your business on a timely basis – and then contact your lender should you wish to access the scheme.

It is important to remember that interest continues to be accrued and capitalised to your loan balance.

Criteria to access the scheme

There are a number of criteria that need to be met in order to access the scheme, including:

  • property landlords need to provide an undertaking they will not terminate leases or evict current tenants for rent arrears as a result of the impacts of coronavirus 
  • businesses need to be impacted by the economic effects that the coronavirus is causing
  • businesses will also need to be up-to-date with their loan commitments for the 90 days prior to applying.

We believe that this is a sensible extension of the scheme and acknowledge that the number and range of businesses that will need this relief continues to increase, including commercial landlords of properties which have tenants that don’t have the ability to meet rent commitments. It is important to be aware of the eligibility criteria and in particular the need to be up to date with loan commitments for the previous 90 days. This will make it critical for you to work with your advisors to access the scheme on a timely basis.

SME package release – 22 March 2020

While some Australian industry sectors are experiencing a surge in activity during the coronavirus (COIVD-19) impacts on our economy, a vast majority are facing a rapid evaporation of their cash reserves – none more so than local small businesses like yours.

In the face of such enormous disruption, our banks, the Australian Banking Association, regulators, the RBA and the government have come together to develop a relief package aimed at protecting the cash flows of small businesses to enable them to stay in business and continue employing the five million Australians that work for them.

Key benefits of the package

  • The RBA backed a term funding facility for banks to support lower cost lending to small and medium businesses.
  • Deferrals of loan repayments of principal and interest for up to 6 months for small businesses, including equipment finance leases and business credit cards.
  • Fast tracked approval processes to enable small business to get access to these relief packages as soon as possible.
  • $100 billion in loans eligible for the package.
  • These measures are forecast to leave up to $10 billion in the hands of small businesses to help them stay in business.

How the banks responded

  • Business customers experiencing financial difficulty can defer principal and interest payments on a range of floating and variable rate loans, equipment leases and business credit cards.
  • Banks are utilising the RBA rate cut and quantitative easing to allow them to cut rates on business lending.
  • Many are providing even greater rate cuts for customers using digital banking products.
  • Banks are also expected to put in place a fast track approval process so businesses suffering cash flow pressures receive the support they need – as soon as possible.

We suggest that you should seek help and advice from your banking advisors on how to access the benefits of these packages. You will need to consider the specific terms of the benefits and take steps to position yourself and your business to be able to obtain maximum support on offer (eg setting up digital banking if you do not have it already). Communicating with your bank is critical at this point, and they will be able to help you build these benefits into your short term cash flow forecasts.

We here at KPMG Australia recognise the critical role that you and your small business plays in the community and in providing employment for millions of Australians. It is clear that this sector is vulnerable to the impact of the coronavirus pandemic and we strongly support any initiatives provided to assist you and your business in maintaining cash. There is no doubt that nimble, innovative and targeted responses will be vital to managing the challenges you may be experiencing. Critical to successfully doing so will be all stakeholders – government, RBA, regulators and the private sector – working together. Now is the time for a united and community-focused response.

Information accurate at the date and time published.

Small businesses are the most vulnerable part of the economy and have the most urgent need for assistance.

Anna Bligh
CEO, Australian Banking Association

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