Banks to help commercial landlords who assist tenants through COVID-19

31/03/2020

Australia’s banks will extend the six-month deferral of loans, building on the Australian Banking Association’s (ABA) Small Business Relief Package, to 30,000 more businesses across the country. 

This support now extends to 98 per cent of all businesses with a loan from an Australian bank, according to the ABA.

Businesses with total business loan facilities of up to $10 million (up from the $3 million small business threshold) will now be able to defer repayments for loans attached to their business for six months. These businesses are generally much larger and employ a greater number of people.  

This extension of support will apply to an additional $100 billion of business loans. Combined with measures already announced, it will mean a six-month deferral of loan payments will apply to up to $250 billion worth of loans, with extra cash available to 425,000 businesses to cope with the crisis during the COVID-19 pandemic.  

During this period banks have also agreed to not enforce business loans for non-financial breaches of the loan contract (such as changes in valuations).  

The new measures will apply in all sectors of the economy, and on an opt-in basis, under the conditions that:  

  • For commercial property landlords, they provide an undertaking to the bank that for the period of the interest capitalisation, they will not terminate leases or evict current tenants for rent arrears as a result of COVID19 
  • the customer has advised that its business is affected by COVID-19  
  • the customer was current in terms of existing facilities 90 days prior to applying 
  • interest is capitalised – meaning either the term of the loan is extended or payments are increased after the deferral period. 

Australian Banking Association Chief Executive Officer, Anna Bligh said, “as this crisis has deepened and more businesses are affected, we are building on the Small Business Relief package to ensure more businesses are given a lifeline to help them survive through the coronavirus pandemic.”

“Banks are expanding their support to an extra 30,000 thousand businesses by raising the threshold of those who qualify for the six-month deferral of loan repayments from $3 million to up to $10 million in total loan facilities. The type of businesses this applies to includes commercial landlords of properties such as local shopping centres, pubs, clubs and restaurants, who must agree not to terminate leases or evict current tenants for rent arrears due to COVID19 in order to access support,” Ms Bligh said.

“This will help protect many more thousands of small businesses from being evicted if they are struggling to pay the rent as it covers approximately 90 per cent of commercial property owners who have loans with an Australian bank. Where landlords within this threshold do the right thing by their tenants, banks will do the right thing by them.”

“When combined with the previous small business assistance announced just over a week ago, this means $250 billion worth of loans covered are able to access a six-month deferral of payments, which means dollars staying in the pockets of businesses throughout this crisis,” Ms Bligh said.   

Businesses with total loans of more than $10 million may also be eligible for relief, but this will need to be considered on a case by case basis as they are often much more complex in their structure. 

Banks have developed this relief package following discussions with APRA and ASIC to provide the appropriate regulatory treatment. 

This measure is announced subject to authorisation from the ACCC.