Australia’s banks have agreed to expand their support to an extra 30,000 businesses by raising the threshold of those who qualify for a six-month deferral of loan repayments from the initial $3 million announced by the Australian Banking Association (ABA) in March to up to $10 million in total loan facilities.
The aim of the measures, which now cover some 98 per cent of all businesses with a loan from an Aussie bank and 90 per cent of commercial property owners, is to ensure small businesses are not being evicted if they’re struggling to pay rent.
While the new measures apply to all sectors of the economy, on an opt-in basis, the ABA confirmed that commercial property landlords will be asked to 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 due to the pandemic.
The ABA CEO Anna Bligh explained that the measures apply to commercial landlords of properties such as local shopping centres, pubs, clubs and restaurants.
“Where landlords within this threshold do the right thing by their tenants, banks will do the right thing by them,” Ms Bligh said.
According to the ABA, this extension of support will encapsulate an additional $100 billion of business loans. Combined with measures already announced, it will mean a six-month deferral of loan payments will apply to up to $250 billion worth of loans, with extra cash available to 425,000 businesses to cope with the crisis during the COVID-19 pandemic.
During this period, banks have also agreed to not enforce business loans for non-financial breaches of the loan contract, such as changes in valuations.
The ABA noted that businesses with total loans of more than $10 million may also be eligible for relief, but this will need to be considered on a case-by-case basis as they are often much more complex in their structure.
NAB welcomes support for businesses
Shortly following the ABA’s announcement, NAB CEO Ross McEwan characterised the measures as “a significant industry-wide initiative”.
He explained that 98 per cent of NAB’s business lending customers, or over 150,000 businesses across Australia, will have access to this support if they have been impacted by COVID-19.
“We will now move to implement these measures as quickly as possible,” Mr McEwan said.
“NAB will work with the industry, government and the regulators on other measures that might be required in the coming weeks and months.”