In an effort to support the recovery of small businesses after JobKeeper, Australia’s Big Four banks have started offering low-rate business loans of up to $ 5 million since April 1.
These loans are available through the government’s new SME loan guarantee program, which has been expanded and extended for the second time since its introduction in March last year.
Now in its third phase, the scheme is open to the following companies:
- Those who received JobKeeper payments between January 4 and March 28, 2021 and have less than $ 250 million in revenue
- Those affected by the recent flooding in Queensland and New South Wales.
To be eligible, you will also need to apply and be approved by December 31, 2021.
One of the big differences with Phase 3 is that the government promised to guarantee 80% of eligible loans, compared to 50% in previous versions. Concretely, this means that companies could potentially access even cheaper financing of participating banks including the big four.
So what are the big four banks – Commonwealth Bank, Westpac, ANZ, and NAB – offering to supply to their small business clients under this program? We will take a look.
Currently, businesses eligible for the program can apply for variable rate loans of up to $ 5 million from CommBank. Rates vary depending on your loan type as well as whether or not you opted for repayment leave, and they start from:
- 2.60% pa for secured loans
- 2.85% pa for secured loans with 12 month repayment leave
- 3.25% pa for unsecured loans
- 4.75% pa for unsecured loans with 12 month repayment leave
According to CommBank, its new rates are up to 75 basis points more competitive than its government-guaranteed loans last year.
âThese lower-cost loans will help businesses invest in assets such as equipment and machinery, and will also support longer-term investments that support growth and jobs. Businesses will be able to use the program to refinance existing loans, âsaid Mike Vacy-Lyle, director of CommBank’s business banking group.
Unlike Commbank, Westpac has only made fully or partially guaranteed commercial loans of up to $ 5 million available to borrowers under the program.
Variable rates range from 2.58% pa up to 4.28% pa depending on a few factors, including the length of your loan and your type of security (excluding residential property). For example, you can expect rates of:
- 2.58% pa for loans fully secured over 3 or 5 years
- 3.48% pa for fully secured 10 year loans
If you need more respite, you can also take repayment leave with these loans. Keep in mind that there are drawbacks to this option, including higher rates and capitalization of interest. The latter means that you will continue to earn interest over the deferred period, which could increase your amount owed in the long term.
Chris de Bruin, Managing Director of Personal and Business Banking at Westpac, encouraged businesses that need more time and support to get back on their feet to apply.
“From tourism operators in Queensland to hotel business owners in South Australia, we have generated a great deal of interest from clients to access the SME Recovery Loan program to help them meet the challenges ahead,” said he declared.
As another supporter of the government’s SME stimulus program, ANZ also offers variable rate business loans of up to $ 5 million with terms of up to 10 years to eligible borrowers. Although ANZ has not publicly specified its interest rates under the program, the big bank said your rate may depend on factors such as your credit rating and financial situation.
Eligible borrowers will be able to choose between secured or unsecured loans (excluding residential property). ANZ’s government guaranteed loans will also include a 12-month deferral option, with capitalized interest. And if you need more support on that front, you can potentially defer payments for an additional 12 months.
Like ANZ, NAB has yet to release its rates under the program, but the big bank has said that eligible borrowers can take either a secured business loan of up to $ 5 million or an unsecured loan of up to $ 5 million. to $ 250,000. Again, you can opt for a 12-month repayment deferral, with capitalized interest.
What can I use these commercial loans from big banks for?
The good news is that under the government’s new program, eligible businesses could use the additional funding for almost any business or business purpose. This includes:
- Additional working capital to increase day-to-day cash flow
- Cover large purchases such as equipment or machinery
- Real estate purchase for your business
- Refinancing of an existing business loan (to access a cheaper rate).
Read our article for more information on the government’s Small Business Stimulus Program, or visit our Business Loan Comparison Center to learn about other financing options for your small business.