This morning, major financial centres in Australia have extended their business relief package by deferring an extra $100 billion worth in business loan repayments. An additional 30,000 commercial landlords will now be eligible for a support coverage in an attempt to relieve the adverse effects caused by the COVID-19 outbreak. The announcement came right after banks announced a six-month deferral for small businesses with loans of $3 million.
The deferral will freeze bank loans of all businesses for the next six succeeding months as the local economy continuously struggles to regain its footing. Now, Australian banks agreed to raise the cap from a threshold of $3 million to $10 million beginning Monday.
Australian banks will offer the business support package to all businesses with loans taken from local financial institutions. The action was projected to lessen the burden from the backs of more than 425,000 small and medium-sized enterprises and their nearly 1.5 million employees, according to Anna Bligh – the CEO of the Australian Banking Association.
For the beneficiaries, this reprieve will come as good news as the deferral will serve as a lifeline amounting to almost $250 billion in bank loans in total. Accordingly, the support package will cover the bank loans of 98 per cent of all local businesses.
Bligh confirmed that over 100,000 entrepreneurs have applied for the deferral of loan repayments last week alone. She described that event as extraordinary.
Bligh said their relief measures would enable businesses to hibernate and re-emerge once the coronavirus outbreak dies down. She expressed concern over businesses that closed down due to government restrictions, saying she worries about those companies and their employees.
Bligh said this announcement would hopefully provide a sense of relief for all affected entrepreneurs that have closed down operations. She also guaranteed that the six-month suspension would not, in any way, impact the credit rating of their customers.
For proprietors with a mortgaged commercial property, banks will grant a leeway on loan repayments given that they will not terminate lease contracts nor charge tenants for arrears in rental fees. These conditions will apply, while the government restrictions are still in effect.
After the crisis, establishments affected by the coronavirus must opt-in at increasing the amount for loan repayment or extending existing loans.
On Sunday evening, Australian Prime Minister Scott Morrison declared that all states and territories have decided to endorse a moratorium order on tenant evictions for the following six months. The government’s move was in response to the massive spike in unemployment and the increasing number of people under welfare payments.
Morrison encouraged all landlords and their commercial occupants, as well as financial institutions to work together in finding means for businesses to survive the recession caused by the coronavirus. He also suggested that property-owners must have a mutual agreement with their tenants in terms of rent relief or provisional amendments to their lease contracts.
Morrison further suggested that lessors provide a discount or waiver in rental payments, or give lessees a choice to terminate lease contracts in the condition that they are under financial distress.
Major financial institutions such as Westpac, ANZ, and the Commonwealth Bank of Australia have expressed their support. However, the measures for deferring loan repayments will still need the approval of the Australian Competition and Consumer Commission (ACCC).