“We question why the interest rates proposed by the lenders are at usual commercial interest rates and feedback from members has revealed some rates are quite high – 11.26% given the ‘unsecured’ nature of the loan,” says Kellie Northwood, CEO of The Real Media Collective (TRMC). “The scheme does raise some concerns in relation to lender behaviour and lending conditions.”
The federal government's Small and Medium Enterprises Guarantee Scheme was implemented as part of its economic stimulus response (updated this week) to the effects of COVID-19 on the economy. It was designed to enhance a lender's willingness and ability to provide credit to SME’s to access funding to help them survive the impact of the pandemic on their businesses.
“Although we have welcomed all steps taken by the government to stimulate economic recovery, and particularly those that aim to assist SME’s, the scheme does raise some concerns in relation to lender behaviour and lending conditions,” says Northwood.
“Under the scheme lenders determine the interest rates and any related fees, although no fees are permitted to be applied to undrawn facilities. However, the Reserve Bank of Australia has provided a line of funding to Australian banks for such purposes via its Term Funding Facility and at a 0.25% rate for the first three years.
“Given these particular loans are assessed through a lender's usual credit assessment processes, backed by a government guarantee, and the funds are available from the RBA at such a low rate, we question why the interest rates proposed by the lenders are at usual commercial interest rates and feedback from members has revealed some rates are quite high – 11.26% given the ‘unsecured’ nature of the loan.”
The TRMC called on the ABA to apply a standard interest rate.
“We have asked the Australian Banking Association for clarification on these varying interest rates and reviewed the 50 lenders websites,” Northwood says. “There appears to be varying rates from 5-7% as base rates and some complexity across what actual rates businesses can expect. We have called on the ABA to provide a standard interest rate range for all 50 lenders and clarification on the varying rates applied. Should the ABA not be forthcoming with such a proposal, we will engage the government direct and seek clarification.”
Northwood told members: “If you have any issues with your financial institution in this regard please outline your feedback and we will assist in directing you to the appropriate personnel within the ABA and/or government department.”
The Real Media Collective was formed in 2018 under a merger from the ACA, APIA and TSA Limited. Its board includes chairman Matt Aitken (COO Ive Group), deputy and treasurer Kevin Slaven (CEO & MD Ovato), and representatives from Australia Post, Reachmedia and Bauer Media. A four-man New Zealand executive board includes representatives from Reachmedia, Webstar and Ovato (NZ). TRMC executive committee includes members from Ovato, Webstar, Ive Group, SAPPI Trading Australia, Bauer Media, Australia Post, Böttcher Australia, UPM-Kymmene, PrintNZ and Ball & Doggett.
Supporters include Fuji Xerox, Visual Connections, Media Super, Ball & Doggett, Flint Group and Starleaton.
