The big four banks publicly welcomed the extension of the government’s SME recovery loan scheme, but privately some sources said the move would do little to support sectors of the economy such as commerce. retail, hospitality and travel.
ANZ said on Monday that a third of recent applications came from “small businesses in the retail, accommodation and cafes and restaurants sectors, all of which have been significantly affected by the closures in Victoria and NSW”.
Opening borders and addressing supply bottlenecks would have a much bigger impact on these sectors in particular, experts said.
Some banking sources said cutting the government guarantee to 50% could make it harder to process loan approvals for SMEs hardest hit by the pandemic, or those that might have been “online” decisions.
But a Commonwealth Bank of Australia spokeswoman said at the 50% level the guarantee remained an effective measure to stimulate the economy.
“The CBA has not changed its credit metrics following today’s announcement and remains committed to helping provide vital cash flow support to enable businesses to recover, adapt and recover. ‘innovate their operations,'” she said.
The cut is the latest in a series of changes to the program, which was expanded to include businesses that weren’t dependent on JobKeeper in October. Banks have so far lent $7.3 billion out of around 80,000 loans to SMEs under the program, but the figure remains well below the $40 billion originally announced.
Mr. Kanevsky said that the lack of availability of workers was the No. 1 problem for all companies, not just SMEs. He pointed to the hospitality industry, where there was no shortage of demand, but the supply of workers posed problems that would not be solved by the flow of cheap credit. Rather, it would create new problems.
“People can’t get labour. It’s not that these restaurants and bars can’t open because they don’t have the capacity to borrow, it’s the fact that they don’t have the people to open,” Mr. Kanevsky.
“Allowing people to borrow more so they can pay more for their labor just creates a different problem. It creates inflationary pressures whereas if you have open borders you can ensure that we have the people to work in those jobs.
Westpac said it saw a 160% increase in loan requests week-over-week through the program and a doubling in the amount of loans requested, with $600 million in requests since October. The bank did not say how much of the $600 million in loans had been approved. He said the interest rates offered were as low as 2.58%.
The CBA, which was the biggest underwriter of loans under the first program, said it issued $2.8 billion to more than 24,000 businesses. CBA Group director for corporate banking, Mike Vacy-Lyle, acknowledged some sectors were under pressure, but said cheap funding would help SMEs invest for new growth.
“As the country reopens, it’s fantastic to see recovery across the sector with many small businesses taking advantage of pent-up customer demand and investing for future growth,” Vacy-Lyle said. “At the same time, we know some businesses have had an uneven recovery and continue to need additional support to restock, rehire and generally resume operations.”
ANZ said its application volumes doubled in November compared to October.
“In the last month alone, we’ve seen twice as many loan applications,” said Isaac Rankin, ANZ’s chief executive for commercial and private banking.
National Australia Bank is the largest player in the SME space. In the past 12 months, its lending to the agricultural sector alone reached $35 billion, up 14% as more farmers used the government’s instant asset write-off program to buy equipment and machinery.
Andrew Irvine, head of business and private banking at NAB, said government loans were useful for businesses looking to capitalize on cheap money to expand.
“Federal government small business stimulus loans are a good option for businesses that need additional capital, helping them to source up or expand to make the most of the bumper Christmas sales,” Mr. Irvine.