Banks are giving struggling small businesses a slight reprieve by deferring loan repayments but will let the loans grow as interest accrues.
The Australian Banking Association announced that lenders have agreed to defer small business loan repayments for six months – a measure that ABA CEO, Anna Bligh, said could put $8 billion back into the hands of small business owners.
“This is a multi billion dollar lifeline for small businesses when they need it most, to help keep the doors open and keep people in jobs,” Bligh said.
“Banks are putting in place a fast track approval process to ensure customers receive support as soon as possible.”
Although loan repayments can be put on pause, interest won’t be. This means that businesses will find themselves facing a bigger loan once the economy gets back into gear.
ANZ said in the fine print of its media release about the deferral scheme that loans will have “interest capitalised” which is the “addition of unpaid interest to the outstanding loan balance".
“The outstanding loan balance increases when payments are postponed during periods of deferment or forbearance and unpaid interest is capitalised.”
Spokespeople for NAB and Westpac confirmed for Information Age that deferred loans from those banks will also continue to accrue interest.
Despite the prospect of businesses coming out of a six month only to face a larger loan, Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, urged struggling small business owners to make the most of the loan relief.
"This is a welcome initiative that will help many struggling small businesses keep their doors open during these extraordinarily challenging times,” Carnell said.
According to the ASBFEO’s Small Business Counts report, small businesses account for more than a third of Australia’s GDP and employ 44 per cent of the country’s workforce.
The report also says small businesses are far more innovative than their big business counterparts.
Telstra won’t lay off workers
Telstra is also changing its business plan to reflect the ongoing coronavirus situation.
The telco announced on Friday that it would pause job reductions for the next six months.
It will also look to hire another 1,000 call centre contractors and is bringing forward $500 million in capital spending to boost its capacity and quicken up the 5G rollout.
Telstra has otherwise been cutting staff in a bid to shed an annual $2.5 billion in costs over the next couple of years.
Telstra CEO, Andrew Penn, said Australia’s business community needed to shoulder the load during the economic crisis driven by the coronavirus.
“COVID-19 is having a profound impact on business across the country. At Telstra we already have more than 25,000 people successfully working from home, and we are supporting many of our customers as they grapple with shifting to working and studying from home,” Mr Penn said.
“It is at times like these that big business can show leadership and make a contribution to the national response and that is what we at Telstra are doing.”
Part of the telco’s relief efforts include the suspension of late fees and service discontinuations until April.
