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Banks approve over $1bn in government-backed SME loans

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
18 May 2020 2 minute readShare

Banks have approved loans worth a total $1.3 billion under the government-backed SME Loan Guarantee Scheme, the Australian Banking Association has revealed.

The scheme intended to support up to $40 billion of lending to SMEs, including sole traders and not-for-profits, has so far seen $1.3 billion rolled out to small and medium-sized businesses struggling with cash flow amid the coronavirus financial crisis.

Overall, total new business lending has reached $86 billion across 77,905 loans, ABA data published over the weekend showed.

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Furthermore, the ABA confirmed that loan deferrals have now hit $211 billion, with roughly one-third for small and medium-sized enterprises.  

The number of deferred business loans peaked at 205,787 as of 16 May, out of total of 703,000 deferrals.   

 

The ABA also revealed that repayments of one in 14 mortgages totalling more than $150 billion have so far been made to assist Aussies through the coronavirus pandemic.  

“Banks are here to support customers throughout the crisis and help the economy on the other side as we recover from the devastating effects of this pandemic,” said Australian Banking Association CEO Anna Bligh.

“Since this crisis started, banks have deferred the mortgage repayments of 429,000 Australian families or a staggering one in 14 of all home loans.

“Australian families who are financially affected by this crisis have had the breathing space they need with a six-month deferral on their home loan repayment while they chart a path through to the other side of this downturn.”

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Speaking to media on Friday, Prime Minister Scott Morrison said that aside from deferring loans, the banks have also been “holding off” on re-evaluations and not pursuing recovery actions other than for pre-existing cases.

“Insolvencies are currently running below average,” Mr Morrison said.

“That’s obviously supported by what Ive just said in terms of the actions that banks have been taking, but also importantly, one of the significant protections that we put in place as a federal government early on was the protections against actions by creditors and others against enterprises in relation to pursuing them and forcing them into liquidation.”

Insolvencies postponed 

In March, the government enacted temporary measures to avoid unnecessary insolvencies and bankruptcies in light of the challenges COVID-19 poses, by providing a safety net for directors and businesses to help them operate during a temporary period of illiquidity.

Intended to run for six months, the changes grant directors temporary relief from the risk of personal liability for insolvent trading with respect to any debts incurred in the ordinary course of the company’s business.

However, head of commercial disputes at Bartier Perry Gavin Stuart told MyBusiness in April that given the expanse of the coronavirus financial impact, the six-month moratorium could simply delay the collapse of a large number of businesses.

“The federal government has given companies welcome breathing space,” Mr Stuart said.

“Now it has to weigh up the risk of a huge wave of companies collapsing just as the economy reopens, or extending and amending legislation to give directors and the businesses they run every chance to trade through one of the greatest economic downturns of our lifetime.”

Mr Stuart warned that while the focus has been on the collapse of large companies such as Virgin, the economic impact of insolvency on just a small percentage of the 700,000-plus Australian businesses that have 20-plus employees could prove far more significant.

Banks approve over $1bn in government-backed SME loans
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has an extensive career as a journalist across finance, business and market intelligence. Prior to joining Momentum Media, Maja spent several years unravelling social, political and economic intricacies in Eastern Europe. 

You can email Maja on [email protected] 

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