If you’re struggling to keep on top of your business finances, you’re not alone.
Your bank will have a dedicated financial assistance team ready to listen and assist during these tough times.
It’s important to be open and realistic about your financial position.
Under the Banking Code of Practice, your bank is required to consider how they can help you with your financial difficulties.
My business loan deferral is coming to an end
If your bank has put your loan repayments on hold and this is due to come to an end, it’s a good idea to follow these steps:
- Check there are sufficient funds available for you to meet the loan repayments and your business credit card repayments are properly arranged
- Check the direct debits to the account as they will also start again.
It’s also advisable to review and update your business budget before the deferral period ends.
The Australian Government’s business website includes guides and tutorials to help you plan and run your business including budgeting advice
If you have any questions about the arrangement in place, or require more information, speak to your bank.
Please open any letters that your bank sends to you as they will contain important information as to your options and who to contact.
What interest will I pay due to a deferral?
In most deferral arrangements, the interest and principal you’d have normally paid during the deferral period will continue to accrue. This will be added to your outstanding business loan balance to be paid once the deferred period ends.
This can be paid by either extending the term of the loan, increasing repayments, or a combination of both. Your bank should contact you with options towards the end of your deferral period or you can contact your bank.
When your bank set up the deferral, you will have received details of the arrangement in writing. You should check what your bank said would happen when the deferral ends.
I really can’t make my business repayments
Don’t panic. Stay in contact with your bank and they will work with you to try and find options to help keep you in business.
Your bank will look at your business plan, cash flow, inventory, profit projections, debtors, and creditors as well as your tax and other documentation to consider the viability of your operation. Your bank will then talk with you about what assistance they could provide to keep you operating as a going concern.
Your bank may also have some effective tools to help you manage your money and business.
What are my options?
Depending on your circumstances and your bank, there may be several options your bank could offer to help your business through these difficult times. Talk to your bank about options to reduce repayments or to restructure your loan.
Your bank may also ask you for relevant information depending on the circumstances. For example, an updated statement of position or a valuation may be required, so they can better understand how they may be able to help with the potential options available.
If you and your bank agree on a new arrangement for your loan, your bank will tell you about the changed arrangements in writing. These will include the new repayments you will need to make and what will happen at the end of the new arrangement. Your bank will also be able to advise you about whether accepting the proposed new arrangement will have any adverse consequences in relation to banking services or your credit history.
If your bank doesn’t allow you to change the terms of your loan, they need to tell you why in writing.
Government assistance may also be available
If your annual turnover is less than $50 million, you may be eligible for a loan of up to $1 million under Phase 2 of the Government’s Coronavirus SME Guarantee Scheme. Check with your bank to see if they are participating in the scheme.
The Australian Government’s business website includes a tool to help you search the grants and support programs available to small business.
Take care of yourself and seek help
Please reach out if you’re feeling stressed about your financial situation. Contact a small business financial counsellor (1800 413 828) or if you are in a regional area contact the Rural Financial Counselling service (1300 771 741) who can provide you with free, confidential planning and support to help make better informed financial decisions for you and your business.
Alternatively, you can speak with an accountant or professional adviser.
Will this affect my credit rating?
Commercial credit reports do not currently include monthly repayment information and will not show if a business has been granted a loan repayment deferral by a bank during COVID-19.
Sometimes your individual credit report may include commercial information related to your business or somebody else’s’ business. For example, this may occur where a loan is taken out by a company and you have provided a ‘guarantee’. If you have deferred a business loan due to COVID, then the repayment history on your personal credit report won’t be negatively impacted as a result of deferring your repayments. Your bank will tell you if they make a report about a default to a credit reporting body.