Westpac cuts lending rate on small business loans against coronavirus

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One of the country’s largest banks has cut lending rates on business loan programs put in place at the start of the coronavirus pandemic.

Westpac has cut rates on small business loans, a measure designed to support growth throughout the economic recovery from the coronavirus pandemic.

The country’s second-largest bank lost nearly 50 basis points on loans offered under the federal government’s coronavirus guarantee program for small and medium-sized enterprises (SMEs), which was implemented in 2020 to provide cheaper financing for businesses.

Three-year unsecured fixed rate loans will drop from 4.48% to 3.99%, while variable rate guaranteed loans up to five years have been reduced by 10 basis points to 2.99%.

The three to five year fully guaranteed fixed rates stand at 2.38 percent.

Westpac investment bank manager Guil Lima said companies should capitalize on cheaper credit to invest in strategies that would provide future growth beyond the expected recovery period.

“It’s nice to see such positive indicators as the economy starts to recover, and there is a clear opportunity for some companies that might be able to invest for future growth, which many tell us they are looking for. to do, ”said Mr. Lima. .

The federal government guarantees 50 percent of loans issued and supports nearly $ 40 billion in small business loans.

Borrowers can access up to $ 1 million for loans of up to five years.

The Brazilian at the head of Westpac’s investment bank also noted that Australia’s effectiveness in limiting the spread of the virus has placed the nation in a stronger economic position compared to the rest of the world.

The big bank predicts that agriculture, healthcare, and businesses looking to expand digital services are likely to benefit from increased domestic investment and cheaper lending rates.

“I am really optimistic about 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 predicts that small business lending rates will remain low while the Reserve Bank intends to keep the official cash rate at 0.1% until at least 2024.

The average life of an SME loan in Westpac’s business portfolio is approximately 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 requested by our clients, it’s about three years, which gives clients the ability to complete a full loan cycle with a lower interest rate. “

Since the inception of the program, the Commonwealth Bank has issued the majority of SME guarantee loans on offer.

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