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Banks back revamped loan scheme to spark investment

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“It is clear from the challenges that we are currently facing in the Victoria that the recovery will not be as smooth or quick as first thought which is why it is essential we come up with creative solutions that offer small businesses, in particular, different ways to play their part in helping the country and Australians get back on their feet,” Mr Comyn said.

“Today’s lifting of the amount available to $1 million and the loan extension to five years will allow SMEs access to low-cost, guaranteed funding and to make the investments needed to get people back to work, create new jobs and lift confidence across the economy as part of the broader efforts to combat the impact of the coronavirus on our country.”

The chief executive of National Australia Bank, Ross McEwan, welcomed the revamp, saying: “The changes will make it available to more businesses, for longer, to help them rebuild – and support Australia’s recovery.”

In addition to Sunday’s support for SME lending, banks expect the government will throw more support at the hard-hit small business sector, amid fresh warnings some firms will not be able to re-open following Victoria’s second lockdown.

Speaking separately from the government announcement, NAB executive of small business Ana Marinkovic said the lender has not yet seen a spike in calls for help from businesses since Melbourne’s latest lockdown.

However, Ms Marinkovic said the lockdown could potentially increase the number of business failures in sectors such as pubs, clubs, and restaurants, and she opposed the removal of support for small businesses.

“I have no doubt that going forward there will have to be some level of support at the federal level and the state level,” she said in an interview.

Despite the weak demand for government-guaranteed business loans so far, Ms Marinkovic said businesses that had adjusted well to the shock of COVID-19 were considering taking on debt to fund expansion.

Council of Small Business Organisations Australia chief executive Peter Strong also predicted stronger demand for credit from some manufacturing firms.

Despite the support provided to small businesses, NAB’s Ms Marinkovic said failures were inevitable: “I have been very clear up until now that we are absolutely going to see a whole lot of businesses fail as a result of the pandemic, despite the best efforts of the industry, banks, governments and regulators,” she said.

Business loans are seen as the most likely source of bad debts to banks, with $56 billion or almost one in five small business loans deferred since the pandemic hit.

NAB last week also pushed for longer-term changes to support SMEs, including cutting the compliance costs involved with hiring workers, making the instant asset write-off permanent, and simplifying employment agreements.

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