The Australian Bankers Association (ABA) has announced that the banks have agreed to extend their eligibility criteria for access to repayment holidays to businesses with loan facilities of up to $10M (previously $3M).
Our experience (prior to this announcement) was that the banks were receptive to requests for a break in repayments however, we welcome this announcement because it provides greater certainty to business owners. It also reduces the ‘admin’ burden on business owners whilst they struggle with the other logistics in winding-down their business operations.
Businesses with borrowings of greater than $10M may also be eligible for repayment relief, but will be assessed on a case-by-case basis.
There are a couple of conditions that are being introduced:
- Commercial property landlords are to provide an undertaking to the bank that for the period of the interest capitalisation, they will not terminate the leases or evict current tenants for rent arrears as a result of Covid-19.
- The customer has advised that its business is affected by Covid-19
- The customers loan repayments were up to date 90 days before applying
- Interest is capitalised (added to the loan) whilst the payments are deferred and the loan is extended, or payments are increased after the deferment period.
The first condition has been introduced to support Commercial Property Landlords. For many small businesses, rent is one of the most significant fixed costs and their business will be dependent on being able to maintain their tenancy once the business can reopen. The only way that tenants and landlords are going to get through this is to work together.