Banks Defer Small Business Loan Payments For Six Months
“We realize these are very rapidly moving circumstances, as the government is having to evolve their response if there is a need that emerges in relation to mortgages, banks will look at what needs to be done,” Ms. Bligh said, urging any customer concerned about their mortgage to contact their bank.
“There is absolutely no doubt the urgent and critical need, and it is a view shared by banks and government – and we have seen evidence in our call centers – is to help small business as quickly as possible, to keep the doors open, keep people in work – and [banks] we won’t see as many Australians falling into mortgage stress….
Business is the activity of making one’s living or making money by producing or buying and selling products (such as goods and services). Simply put, it is “any activity or enterprise entered into for profit. It does not mean it is a company, a corporation, partnership, or have any such formal organization, but it can range from a street peddler to General Motors .”
Having a business name does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business. If the business acquires debts, the creditors can go after the owner’s personal possessions. A business structure does not allow for corporate tax rates.
The proprietor is personally taxed on all income from the business.
The term is also often used colloquially (but not by lawyers or by public officials) to refer to a company. A company, on the other hand, is a separate legal entity and provides for limited liability, as well as corporate tax rates. A company structure is more complicated and expensive to set up, but offers more protection and benefits for the owner.
Banks defer small business loan payments for six months
A payment is the trade of value from one party (such as a person or company) to another for goods, or services, or to fulfill a legal obligation.
Payment can take a large variety of forms. Barter, the exchange of one
good or service for another, is a form of payment. The most common means of payment involve use of money, cheque, or debit, credit or bank transfers.
Payments may also take complicated forms, such as stock issues or the transfer of anything of value or benefit to the parties. In US law, the payer is the party making a payment while the payee is the party receiving the payment. In trade, payments are frequently preceded by an invoice or bill.
In general, the payee is at liberty to determine what method of payment he or she will accept; though normally laws require the payer to accept the country’s legal tender up to a prescribed limit. Payment is most commonly effected in the local currency of the payee, unless if the parties agree otherwise.
Payment in another currency involves an additional foreign exchange transaction. The payee may compromise on a debt, i.e., accept a part payment in full settlement of a debtor’s obligation, or may offer a discount, E.G: For payment in cash, or for prompt payment, etc.
On the other hand, the payee may impose a surcharge, for example, as a late payment fee, or for use of a certain credit card, etc.
The acceptance of a payment by the payee extinguishes a debt or other obligation. A creditor cannot unreasonably refuse to accept a payment, but payment can be refused in some circumstances, for example, on a Sunday or outside banking hours.
A payee is usually obligated to acknowledge payment by producing a receipt to the payer. A receipt may be an endorsement on an account as “paid in full”. The giving of a guarantee or other security for a debt does not constitute a payment.
“Banks are not reporting a rise in distressed home loan customers but they are reporting a rapid and exponentially increasing number of calls from small business in distress who are unable to meet payment.”
The Australian Competition and Consumer Commission provided urgent interim authorisation on Friday afternon to allow the banks to work together on the assistance package. “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,” ACCC chairman Rod Sims said.
The new package will apply to more than $100 billion of existing small business loans, and it will go to any small business – defined as customers with less than $3 million in total debt owed – struggling as a result of Covid-19.
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 ACCC said.
The bank chiefs discussed the moves Treasurer Josh Frydenberg and Australian Prudential Regulation Authority chief Wayne Byres late into the night on Thursday following the Reserve Bank’s emergency cash rate cut and creation of a scheme allowing banks to tap the central bank’s balance sheet to get cheap funding for small business loans.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said it was encouraging to the banks take “this proactive approach and leading by example… This is a welcome initiative that will help many struggling small businesses keep their doors open during these extraordinarily challenging times.”
In an after-market briefing on Thursday, Reserve Bank governor Philip Lowe said he was concerned about a rise in unemployment triggered by shutdowns pressuring highly indebted households.
“The vulnerability for households comes if they lose their jobs, which is why we focus on doing what we can for businesses to keep employing people and keeping staff on,” Dr Lowe said.
“If [banks] don’t support people, the unemployment rate will be higher, there will be more stresses, the economy will be weaker, and the banks’ credit losses will be larger.”
Ms Bligh said small businesses are the most vulnerable part of the economy, employing five million Australians and is small businesses “can rest assured that if they need help, they will get it”.
“Banks are already reaching out to their customers to offer assistance and packages will start rolling out in full on Monday.”
She also reinforced the message delivered by Reserve Bank governor Philip Lowe on Thursday that Australia has a strong and stable banking sector well placed to respond to the crisis. “Whether they are large or small banks, Australian banks are as well capitalised as they have been, have balance sheets as strong as they have ever been, and they stand open to lend to businesses who may need that.”
Banks that have agreed to participate in the ABA plan are AMP Bank, ANZ, Bank Australia, Bank of Queensland, Bendigo and Adelaide Bank, CBA , HSBC, Macquarie Bank, NAB, Suncorp Bank and Westpac.
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