Ever since the pandemic arrived in Australia we’ve been assessing and reassessing how we can best support our customers.
It’s been a bit of a movable feast as we adapt to what our customers need – and that can mean different things for different customers, especially in business. Some have been in pure survival mode while others have outperformed expectations as they rejigged or reshaped business models to capitalise on shifting markets.
One new aspect of how we can support our business customers is the recent changes to the Federal Government’s expanded COVID-19 SME recovery loan scheme.
The scheme has been expanded and extended so eligible businesses affected by the pandemic with a turnover of less than $250 million can access loans of up to $5 million for terms up to 10 years at historically low rates.
Previously, to be eligible for support, businesses must have received JobKeeper during the March quarter or have been affected by floods. This was a relatively narrow group of businesses and we think the broadening of the scheme’s eligibility is a great opportunity for businesses to access finance as they attempt to rebound from COVID-19.
Many of these businesses aren’t just fighting for survival anymore but have good longer-term prospects, particularly as New South Wales and Victoria edge closer to coming out of lockdown.
They want to make up for lost time, get back on track and seize the opportunities before them. But for businesses to rebound in this way they need a couple of things: they need access to funds; and they also need confidence.
The future doesn’t have to be massively rosy but they must have some confidence and the belief trading conditions over coming months will at least be the same or hopefully better than they are now. Once businesses have a base level of confidence, we will see a greater propensity to invest and we think this scheme has the potential to be an important kick starter for economic recovery. It will help businesses obtain finance on generous terms and low rates.
Understandably, lending volumes from business customers have been pretty subdued. Funds on deposit from businesses have actually increased strongly over the past year which would suggest business owners have been taking a conservative approach thus far.
Across ANZ’s business portfolio, we’re still approving loans at about the same rate as we were prior to COVID-19. Pre-pandemic we were approving about 80 per cent of applications and we're still approving at about the 80 per cent level. What's been notable is we haven't had as many applications, which is an indication that confidence and business opportunity have potentially been greater issues than the ability to access finance.
This scheme, and other government support, combined with a clearer roadmap of what the future looks like, will, we believe start to drive growth in business loan volumes.
In aggregate, small businesses are big employers and a crucial piece of the economy. Individually they might be small but if you can get private business and SMEs firing, they can be the engine room to spark national economic growth. Our experience over the past year or so has clearly shown as you come out of lockdown, you get a rebound. Recent economic data prove it and we would expect the same as our two largest states re-emerge.
There is another factor that will aid that confidence-led recovery and that is an element of predictability for businesses: what they can expect in terms of their ability to trade.
I think most business owners are relatively comfortable with the business risk of trading, even in the current market, but the uncertainty of rolling lockdowns can take that predictability away. These are things outside their control and outside their normal business risks.
If a clear roadmap can deliver more predictability for them, alongside government support, I think that combination will be important in building the underlying confidence and encouraging a rebound in growth.
We think there are many businesses out there who think they are not eligible for this scheme. So our message is, get in and start talking to us now because the scheme is only open to December. This is an opportunity for businesses to make up for lost time, get back to where they might have been and to go forward with some confidence.