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The big banks were on the defensive on Friday due to federal government criticism over their handling of a COVID-19 business loan scheme, as fintechs hit out at their larger rivals for slow systems that take too long to distribute funds.
Commonwealth Bank and Westpac have now joined ANZ and NAB in setting up JobKeeper customer helplines to quicken response times for businesses seeking cheaper unsecured loans to pay staff.
The furore relates to a $40bn coronavirus small business loan scheme, which is 50 per cent guaranteed by the government. Prime Minister Scott Morrison’s office this week ordered the banks to ramp up efforts to get funding to businesses while they await JobKeeper payments to distribute to staff. The government is frustrated at the time it is taking for businesses to receive loan funding, while anecdotal evidence gathered by The Weekend Australian also suggests confusion around the scheme and a reluctance by some businesses to take on more debt.
Treasurer Josh Frydenberg confirmed on Friday about 40 bank and non-bank lenders had been approved for the scheme, and he had signed off a total loan allocation of $34bn of the $40bn.
“The government expects all participating lenders to work with their customer to have loans processed in the timely manner,” he said. About 6300 small businesses have been approved under the scheme, which provides three-year loans structured so that interest is deferred for the first six months. Several small lenders are still pitching to gain access to the scheme.
Banks are privately reporting, though, that some businesses mistakenly thought at the outset the loan scheme was a grant, while demand for the loan scheme has not been as high as anticipated. The major banks were understood to have initially lobbied the government for an 80 per cent guarantee.
“If they’d have set it up properly (the JobKeeper package) this wouldn’t have occurred,” one industry source said, of the delay between announcing the measure in late March to payments commencing in May.
Lenders must still conduct a credit assessment for loans under the scheme.
The Australian Banking Association said the sector had already granted more than $700m worth of loans to businesses to help them through the crisis.
CBA’s head of business banking, Mike Vacy-Lyle, said the bank supported the government’s aim to quickly get much needed funding to those requiring it.
“We have approved more than $375m in loans for thousands of small businesses so they can stay open for business, hibernate through the shutdown and retain staff. Almost 80 per cent of these loans are for businesses eligible for the JobKeeper program so will help small businesses keep their staff,” he said.
The other big three banks are not providing up-to-date numbers on approvals under the loan scheme.
Westpac has said about 40,000 businesses have been granted loan repayment deferrals.
An ANZ spokesman said: “We have provided increases in working capital to many thousands of our impacted customers, we understand a large number of those have used it to keep employees on until JobKeeper payments arrive.”
Ross McEwan, chief executive of National Australia Bank — the biggest lender to business — on Thursday expressed his support for the loan scheme. As at April 9, NAB had about 4500 online requests for the support loan, while 28,000 repayment deferrals had been required by businesses.
But CBA documents obtained by The Weekend Australian tell potential borrowers they will receive the results of preliminary eligibility for the new loans within five business days, with estimated time for completion and funding at four weeks.
Non-bank lender Lumi was this week approved as a provider of unsecured business loans under the government’s scheme.
Lumi founder and boss Yanir Yakutiel said the technology-based lender could typically undertake same day approval and settlement for a business loan, whereas large banks were slow and dealing with “systems that are antiquated”.
Lumi is modelling pricing for its new loan under the scheme, but he estimates it will be 2-3 per cent below the average 14-22 per cent it charges business borrowers.
Co-founder of business buy-now-pay-later provider, Cloudfloat, Aleem Habibullah said cashflow in the immediate term was needed most by businesses navigating the crisis.
“We’ve seen this movie before and we’re seeing it again now. The banks are becoming part of the problem … Their systems and processes are slow, their lending processes are slow.”