Small Business Assistance Package
On Friday 20 March 2020, the Australian Banking Association revealed that all small businesses hit by the COVID-19 pandemic will be able to access a six-month deferral of all loan repayments.
This package will apply to more than $100bn of existing small business loans and could put up to $8b back into the pockets of small businesses.
What is a deferment period?
A deferment period is an agreed-upon time during which a borrower does not have to pay the lender interest or principal on a loan.
What happens at the end of a deferment period?
Interest will accrue during a deferment period, which means the interest is added to the loan amount at the end of the deferment period. Usually you would have two options to catch up on the repayment that were put on hold, the first is to increase your repayments to ensure the loan is repaid within the original term. The second is to extend the loan term by the amount of the deferral period.
How do I apply?
There are a few lenders that will apply the deferral to eligible business and equipment loans automatically and you will need to opt out if you would like to continue making your repayments. There are other lenders that you will need to contact to discuss the options available to you.
Should I defer my payments?
It depends on your circumstances, for example if you can afford to continue to meet your repayments you will pay less interest over the term of your loan. On a loan with a balance of $100,000 and an interest rate of 5%, if you were to differ your repayments for 180 days the balance at the end of the 180 days would be $102,465
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