Government-backed loans facing overwhelming doubt

by Madison Utley09 Apr 2020

New research has revealed businesses’ overwhelming lack of confidence the new government-backed loans will be delivered in a timeframe that will guarantee their survival through the economic hardship brought on by the COVID-19 pandemic.

Four in five business owners (79%) believe banks will not be able to approve and settle loans under the Coronavirus SME Guarantee Scheme as quickly as is necessary.

The survey of 207 business owners, commissioned by lending platform, looked to gauge the level of confidence businesses have in lenders approved to participate in the scheme and who are receiving the RBA’s facility of low-rate loans during the pandemic.

The research found that 70% of businesses feel they need the loans to survive. Of these, 12% said it was already too late for their business, and 32% would need a loan by the first week of May.

The Coronavirus SME Guarantee Scheme was announced over two weeks ago on 22 March, but ANZ, Bankwest, Bendigo and Adelaide Bank, and Suncorp are still in the process of finalising their loan details.

Interestingly, the survey also found that confidence in non-banks to deliver the loans is equally low with just 34% of respondents believing they could approve and settle loans faster than the banks.

“There is currently the very real and ongoing issue of bottlenecks in loan approvals among the banks,” said Bill Baker, CEO of Lend Capital.

“However, the biggest problem for borrowers is beyond that. Without knowing which lender’s criteria matches their credit profile, a business will go through the time-consuming process of making an application with one lender, waiting weeks in the queue for the result, and approach another if they are not approved. They will be forced to continue shopping around between lenders in an effort to secure much-needed funding.

“Ultimately, there is a lot of confusion among borrowers. Finding the right lender with the right product is the longest part of the approval process. Once a lender matches the customer profile to its lending criteria, the process is very straightforward.

“Small-to-medium businesses are the backbone of the Australian economy and they need the money now. For businesses in certain sectors, delays in these loans may render the Government’s JobKeeper wage subsidies ineffective for holding onto employees, as a large proportion need to cover other significant costs to remain operable over the coming weeks.”