Having worked in finance and lending for the past 15 years I have seen some interesting times, the current banking and finance environment is no exception. It would appear that banks have changed their tune on how they deal with a situation like this, compared to events like the GFC. Whilst these is very challenging times for a lot of Australians economically, we are now dealing with banks that are in a much more supportive frame of mind backed by federal government stimulus.
I am having more conversations now than ever with our client base and these are the typical themes that I wanted to highlight
Are banks going to stop lending money?
I would say no, and in fact they are open for business and providing finance more readily than they have in the past few years, for the right transactions. Borrowing money is cheaper than it has been for generations. The RBA made an outside of cycle decision to reduce the cash rate on Thursday 19th March to 0.25%. Three of the big 4 banks have announced that they will reduce variable rate small business loans by a full 1%. That is putting a lot of small business loans with an average variable rate of 2.50 – 3.50%.
Credit policy across the banks is more commercial than it has been for the past 3 years and the federal government is supporting lenders with $15b to lend to Small to Medium Businesses to assist with cash flow.
So for a business that is in need of some capital or assistance with cash flow during this time I would not hesitate in talking to your broker or banker to see what is available before they make any significant decisions.
What are the banks doing to help with clients in hardship
Unlike during the GFC, I am finding the banks are on the front foot here and anticipating that there will be people and businesses that fall into hardship for a period of time. They are all writing to us to ask us to communicate to our clients that should they fall into financial hardship the bank is there to support them through this event as best they can with solutions such as:
- Deferring Loan repayments for 3 to 6 months
- Option to extend loan term to reduce principal repayment amounts
- Restructuring and consolidating loans
- Access to term deposit funds without reduction in interest rate
- Deferred payments for Credit Cards
- Financial Counselling access
- Fee waivers
I would say the most important thing to do if you do find yourself in hardship is to contact your bank early to see what is available, as these measure will not effect your credit rating. Failing to make repayments without consulting your bank will affect your credit rating
If you are dealing with the impact of COVID-19 pandemic or facing the impacts of drought, bushfire or flood, there are practical ways your bank can help. Australian banks have hardship teams ready to help you depending on your circumstances. Here is a comprehensive list of Australian Financial institutions contact details.
Greg Rodham is the owner of Sterling Lending and has worked in Finance and Lending for the last 15 years. Greg works with all banks to ensure you are getting the best finance deal. If you are looking to restructure, consolidate loans or do a comparison on your existing loans, you can contact Greg by email email@example.com or mobile 0421 444621.