Aspen's View: Banking Deferral Requests
There have been newsletters circulated which have indicated that businesses who applied for deferrals on loans may subsequently find that this was treated as a credit event which may affect their credit rating in the future.
We are happy to see that common sense prevailed and this has been clarified. The banking industry have agreed to a joint response to COVID-19 loan repayment deferrals stating that these will not impact a borrower's credit rating.
This approach has also been supported by APRA and other reporting agencies.
So, what have we seen occurring in the banking Sector with respect to loan deferrals and the $250,000 loans?
Equipment and General Loans
With respect to deferrals on equipment loans, there are a range of options that banks are offering, not always consistently across the banks. Some of the options banks are offering include:
- deferrals of repayments from 3 months up to 6 months,
- deferring the repayments with no agreement on how the deferrals will be dealt with,
- agreements of deferring but with restructured contracts,
- deferring all repayments from date of applications,
- Some banks citing internal systems issues and only deferring payments after 31 March or 30 April, especially with customers on quarterly bill rollovers, and
- Some banks are restricting facility limits and others are not.
$250,000 loans
There is not very much detail available yet as these only became available in April.
What we have seen is that some banks are making it easier than others to apply for these, while some banks are looking to group businesses so there is only one loan per group.
We have also seen that some of the banks, following a request for deferral, have delayed processing the $250,000 loan until after the deferral process is completed which may add an extra week.
What is clear is that t here is no interest rate consistency from the banks for these loans.
Conclusion
There is a very mixed bag of offerings across the banking sector. We advise seeking advice before you enter a deferral arrangement.
Ensure you understand the terms and real costs of rewriting any loans or equipment finance contracts.
The devil is in the detail
.
We advise making sure that you can demonstrate the need for the $250,000 loans before making your application to improve your potential of securing a loan.
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