Business loans surge amid coronavirus shutdown

Businesses are rushing to grab whatever help they can, with banks reporting a surge in demand for loans.

CBA said that close to 15 per cent of applications have been from hospitality businesses, with construction and professional services respectively representing 13 per cent and 12 per cent of loans undertaken.

Australia’s major banks are experiencing a surge in loan applications from small and medium businesses as the effects of coronavirus shutdowns reverberate through the economy and community.

The surge in loan queries comes off the back of the federal government’s COVID-19 support measures, designed to throw small and medium businesses an economic lifeline during the pandemic.

Commonwealth Bank on Monday, said it had approved more than $150m in loans to about 1850 small and medium businesses, with group executive business and private banking, Mike Vacy-Lyle, explaining the loans would enable businesses to stay afloat during the crisis.

“The situation demanded an immediate response because so many businesses need immediate access to capital,” Mr Vacy-Lyle said.

“We worked around the clock and pulled out all stops to make sure we were ready to start taking applications for these loans the day after the government announced the coronavirus SME guarantee scheme.”

CBA announced the support package on March 22, noting that the new unsecured loans were 500 basis points lower than the current rates.

As of April 6, NAB said it had received more than 3000 online requests regarding its business support loan scheme, which was implemented on March 28.

The bank will allow businesses to loan up to $250,000 at a rate of 4.5 per cent, with no repayments required in the first six months.

ANZ told The Australian it had implemented its support measures on Monday, which will allow businesses to apply for a loan that is 50 per cent guaranteed by the government.

“As part of our support package for business customers, we included the ability to increase overdrafts by 10 per cent,” an ANZ spokesman said.

“Since launching that package on 20 March we have approved about 5000 customers for that [overdraft] increase.”

Westpac said on March 30, it would provide unsecured three-year term loans for up to $250,000 to businesses with a turnover of less than $50m.

It is understood that Westpac is in the process of finalising its business loan support package.

CBA noted nearly 70 per cent of the loans approved have come from businesses located in either NSW or Victoria.

It said that close to 15 per cent of applications have been from hospitality businesses, with construction and professional services respectively representing 13 per cent and 12 per cent of loans undertaken. Approximately 11 per cent of loans are from retail businesses.

Under CBA’s support package, businesses with an annual turnover of less than $50m will be eligible for three-year loans that attract interest rates beginning at 4.5 per cent. Loan amounts will be up to $250,000.