Big banks throw support behind government’s $20b business loan guarantee
Major banks have pledged to provide billions of dollars in taxpayer-backed loans to stricken small businesses under an emergency scheme designed to help firms to survive the economic carnage caused by coronavirus.
After the government on Sunday unveiled a $66 billion plan aimed at helping firms and households survive a plunge in economic activity, three of the major banks were quick to support a scheme that will see the federal government guarantee a portion of new small business loans.
The government will provide up to $20 billion in loan guarantees for banks.Credit:Ryan Stuart
The policy, which came out of talks between bankers and government officials, will see the federal government guarantee 50 per cent of new loans issued by eligible banks to small and medium enterprises in need of working capital. The government will provide guarantees of up to $20 billion, thereby supporting up to $40 billion in loans.
The scheme will work alongside a Reserve Bank policy unveiled last week to provide $90 billion in funding for commercial banks at interest rates of 0.25 per cent, provided banks use the funds to increase business lending.
Commonwealth Bank chief executive Matt Comyn said the bank would make up to $10 billion available in funds for extra unsecured business loans. Mr Comyn said the government's package could help "help hundreds of thousands of small businesses stay afloat and millions of workers keep their jobs over the next six months."
“By acting quickly, we can soften the impact of the coronavirus on small businesses across the country and the millions of Australians who depend on them for employment," Mr Comyn said in a statement.
“We stand shoulder to shoulder with the Government, the Reserve Bank, and the wider business community to produce the most effective package of measures on a larger scale and implemented faster than ever before."
CBA said its interest rates on unsecured loans would be 5 percentage points lower than normal, and they would be available to companies with turnover of less than $50 million.
National Australia Bank chief executive Ross McEwan said the loan guarantee scheme would be "critical" in helping businesses get a cashflow injection to keep staff employed.
“NAB strongly supported and advocated for the establishment of this scheme. We will now work with the Government to implement these measures as quickly as possible and help ensure everything that can be done is being done to support Australians through this," he said.
Westpac's acting chief executive, Peter King, said the bank would participate in loan guarantee program. "We believe it will provide significant support for small to medium businesses," Mr King said.
An ANZ Bank spokesman said the bank strongly supported the stimulus package as a whole, and it would work with the government on further details in the coming days.
The loan guarantee comes after all of the country's major banks on Friday said they would allow business customers to defer their loan repayments by six months due to the economic crisis, which has already led to a sharp rise in cries for help to banks from small firms.
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