Westpac has commenced offering an unsecured three-year term loan up to $250,000 to all business customers with a turnover of less than $50 million.
In line with the Australian Banking Association’s (ABA) announcement last week, the product is available with a six-month payment free option, which will be capitalised upon expiry of the repayment holiday.
Westpac confirmed that the offering will be available to both new and existing customers that meet the eligibility criteria for a six-month repayment holiday.
As a result of the Reserve Bank of Australia’s (RBA) announcement of a $90 billion term funding facility (TFF), Westpac’s new product will be offered at a 4 per cent discount to its current unsecured small-business loan.
Westpac’s new offering is part of the banking sector’s broader response to the economic fallout from the coronavirus (COVID-19) outbreak.
Following the announcement, Guil Lima, Westpac’s chief executive, business division, said: “We all have a role to play in this extraordinary and challenging time.
“Westpac is strong, and we are determined to help our customers in any way we can.”
Starting from Monday (23 March), the new unsecured business loans are reportedly 500bps lower than current rates.
The rollout of both Westpac and CBA's new offerings also come just days after the federal government announced its new SME loan guarantee.
Under the scheme, the government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.
The government’s scheme aims to “enhance lenders’ willingness and ability to provide credit to SMEs” and can support up to $40 billion of lending to SMEs (with the government guaranteeing up to $20 billion).
It is hoped that the scheme will assist with cash flow and enable SMEs to pay staff, rent and bills.
The scheme builds on the government’s previous commitments to provide the AOFM with an investment capacity of $15 billion to invest in wholesale funding markets used by small authorised deposit-taking institutions (ADI) and non-ADI lenders.
The banking sector has welcomed the government’s initiative, with CEO of the Australian Banking Association (ABA) Anna Bligh describing the scheme as a “lifeline” for small businesses.
“This is a time for close co-operation between government and our banking sector, and the industry will continue to play their part to build the economic bridge to recovery,” Ms Bligh said.
“It’s important that small businesses across the country are given a lifeline to get them through the difficulty wrought on the economy by the COVID-19 pandemic.
“Banks stand ready to help their business customers get through this, whether it’s deferring their loan payments or providing more working capital.”
Westpac group’s acting CEO, Peter King, also welcomed the announcement, which he said would provide “significant support to the sector”.
“We all have a role to play and we all have to put our shoulder to the wheel. Westpac over its 202-year history has assisted its customers through many crises,” he said.
“We are a strong bank and are determined to assist our customers through these extraordinary times.”
NAB group CEO Ross McEwan said the scheme would be “critical” in helping banks provide businesses with a “quick cash flow injection to stay open and keep people in jobs”.
“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.
Mr McEwan added: “This is an extremely difficult time, but we will get through this together and NAB will support our customers in any way we can.
“NAB continued to lend through the GFC, and we’ll continue to lend through this.”
Mr McEwan encouraged customers to call NAB to discuss they might be able to access the relief package.
“If any customer has questions or concerns, please don’t wait – contact your banker now.”
CBA CEO Matt Comyn said: “We welcome [the announcement] by the government, which will help hundreds of thousands of small businesses stay afloat and millions of workers keep their jobs over the next six months. It will help businesses reopen and help people get back to work following this unprecedented set of circumstances.”
Mr Comyn added: “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.”
[Related: Banks to suspend SME loan repayments]
Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.