As accountants, you’ve probably been in constant contact with your clients due to the recent government tax breaks for business owners and the larger economic impact of the novel coronavirus pandemic.
We’ve seen a lot of official and unofficial changes to lending policy that will affect your clients.
So here’s a brief summary that may help you to help them navigate the current situation:
- Equipment finance lenders have become much stricter (varies a lot).
- Quick online unsecured business loans (Moula, Prospa, GetCapital etc) are significantly more conservative. One such lender told us that they are approving 1 in 20 applications. Anecdotally, we’ve seen them offer much lower limits on the loans that they do approve.
- Business owners in various industries are effectively declined e.g. tourism, fitness, pubs etc.
- We’re yet to see the impact of the various guarantees around business lending. Business bankers are slow at the best of times so we are not hopeful that clients can get things done quickly via the business banking channels.
Residential lending policy changes
- In residential lending the lenders are all over the place with some lenders like NAB taking 20 business days to approve a loan and others taking 1 day.
- Some lenders have pulled back on low doc loans, however they are still available.
- Overtime, casual, contract, commission and bonus income is being ignored by most lenders. We’ve got around this a few times by getting confirmation from their employer. I expect policy will loosen up in regards to income in approx 3 – 6 months time as most of the job / income losses will be happening now.
- Staff on probation are difficult to approve.
- No changes on investment loans or standard home loan policy.
- Banks are genuinely being helpful with customers unable to make mortgage or business loan repayments. Many banks and lenders have offered to deferr mortgage and business loan repayments for 3 to 6 months for customers affected by this crisis. Please see our section on coronavirus for the latest updates.
- Borrowing power has increased with some lenders as they have dropped their floor assessment rate in line with the recent rate cuts.
- We’re expecting future changes such as lower LVRs, restrictions on cash out (releasing equity) and minimum credit scores will increase. These haven’t happened yet.
- Non-bank lenders saw their overseas funding sources freeze up last week. The government assistance announced last week for small lenders will hopefully change this.
To sum it up if someone is in a good position then everything is open for business and if they are not, then it’s much harder. Banks give you an umbrella on a sunny day and take it away when it rains. It’s the unfortunate nature of our industry.
We’re here to help!
Regardless of their situation, we’re here to help if any of your clients need advice on what to do.
Our mortgage brokers are working from home and are available to assist you in any way possible.
Call us on 1300 889 743 or fill in our short assessment form to discuss your situation.