Australian banks will defer loan repayments for small businesses affected by Covid-19 for six months, the Australian Banking Association recently announced.

Australian Banking Association CEO, Anna Bligh, has confirmed a small business relief package from Australia’s banks, which will apply to more than $100bn of existing small business loans and depending on customer take up, could put as much as $8 billion back into the pockets of small businesses.

“This is a multi-billion-dollar lifeline for small businesses when they need it most, to help keep the doors open and keep people in jobs,” said Bligh.

“Banks are putting in place a fast track approval process to ensure customers receive support as soon as possible," she said.

The banks, according to Blight, have worked closely with the Treasurer and the Government over the last few days to identify measures to support the economy.

“Small businesses are the most vulnerable part of the economy and have the most urgent need for assistance," said Bligh.

“Small businesses employ five million Australians and this package is designed to help them keep doing just that.

“Small businesses can rest assured that if they need help, they will get it," she said. "Banks are already reaching out to their customers to offer assistance and packages will start rolling out in full on Monday."

Banks have developed this Small Business Relief Package following discussions with the Australian Pridential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) to provide the appropriate regulatory treatment.

The Australian Competition and Consumer Commission (ACCC) has provided urgent interim authorisation to allow the Australian Banking Association (ABA) and banks to work together to implement a small business relief package.

“The ACCC recognises the significant financial hardship many Australian small businesses and their staff are experiencing as a result of this unprecedented crisis,” said ACCC Chair, Rod Sims.

“We recognise the urgency of this issue. We consider that this relief package will enable banks to quickly provide relief to impacted businesses, and allow them to keep employing their staff.

“Importantly, interim authorisation does not mean that individual banks can’t decide to offer more favourable and tailored terms to their small business customers experiencing financial hardship during these times," he said.

The interim authorisation applies to all ABA member banks who agree to participate, which at this stage includes AMP Bank, ANZ, Bank Australia, Bank of Queensland Limited, Bendigo and Adelaide Bank Limited, Commonwealth Bank of Australia, HSBC, Macquarie Bank, National Australia Bank, Suncorp Bank and Westpac.

The package includes a deferral of principal and interest repayments for all term loans and retail loans for 6 months, for small business customers with less than $3 million in total debt owed to credit providers.

At the end of the deferral period businesses will not be required to pay the deferred interest in a lump sum. Either the term of the loan will be extended or the level of loan repayments will be increased.

The ABA sought ACCC interim authorisation on behalf of its members because the relief package involves coordination by competing banks, actions that would otherwise raise concerns under Australian competition laws.