Westpac slashes lending rate on coronavirus small business loans

One of the country’s largest banks has slashed lending rates on business loan schemes implemented at the start of the coronavirus pandemic.

Westpac has slashed rates on small business loans. Picture: NCA NewsWire / Gaye Gerard

Westpac has slashed rates on small business loans, a move designed to support growth through the economic recovery following the coronavirus pandemic.

The country’s second largest bank has shed nearly 50 basis points off loans offered through the federal government’s coronavirus small and medium enterprises (SME) guarantee scheme, which was implemented during 2020 to provide cheaper funding to businesses.

Three-year unsecured fixed loans will move from 4.48 per cent to 3.99 per cent, while secured loans of up to five years on a variable rate have been cut by 10 basis points to 2.99 per cent.

Three to five-year fully secured fixed rates sit at 2.38 per cent.

Westpac business bank executive Guil Lima said firms should be capitalising on cheaper credit to invest in strategies that would provide future growth beyond the expected recovery period.

Westpac Business Bank chief executive Guil Lima said it was pleasing the economy was showing faster signs of recovery Picture: Christian Gilles / NCA NewsWire

“It’s pleasing to see such positive indicators the economy is starting to recover, and there’s a clear opportunity for some businesses that may be in a position to invest for future growth, which many are telling us they are looking to do,” Mr Lima said.

The federal government guarantees 50 per cent of the loans on issue and is supporting close to $40bn of lending to small businesses.

Borrowers are able to access up to $1m i for loans of up to five years.

The Brazilian at the helm of Westpac’s business bank also noted Australia’s efficiency at curtailing the spread of the virus has put the nation in a stronger economic position compared with the rest of the world.

The major bank anticipates agriculture, health and companies seeking to expand digital services will likely benefit from a rise in domestic investment and cheaper lending rates.

Up to 50 basis points have been cut from SME loans. Picture: NCA NewsWire / Daniel Pockett

“I am really bullish on Australia,” Mr Lima said.

“I think the recovery being much faster than the rest of the world is going to have a lasting and positive impact.”

Access to SME guarantee loans will end on June 30; however, Westpac anticipates small business lending rates will remain low while the Reserve Bank intends to keep the official cash rate at 0.1 per cent until at least 2024.

The average life of an SME loan on Westpac’s business book is roughly three years.

“If the direction was 12 months there would be a lot more uncertainty,” Mr Lima said.

“Then if you look at the average loan term our customers ask for, it is around three years, so that gives customers an opportunity for a whole loan cycle with a lower interest rate.”

Since the scheme’s implementation, Commonwealth Bank has issued the majority of SME guarantee loans on offer.