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Major bank shakes up SME loans approach


One major bank says it is implementing a “complete overhaul” of its approach to business loan contracts, several months after a government inquiry called for simpler and fairer loan terms for Australian SMEs.

By Katarina Taurian11 minute read

NAB will be changing its existing business standard loan form contract to include simpler clauses and language and a reduction in document length. Terms and conditions have also been chopped by a third.

The changes come after NAB announced financial indicator covenants will no longer be used in most loan contracts for new and existing small business customers with total business lending of less than $3 million in April 2017.


NAB also recently announced its intentions to expand into the accounting market, with a view to eventually have dedicated bankers for the accounting market.

Australian Small Business and Family Enterprise Ombudsman Kate Carnell’s small business loans inquiry recommended these moves for Australian banks in December last year, for implementation by July 2017.

It followed unfair contract terms legislation coming into force last November.

“The inquiry report recommended that where a small business had met loan payments and acted lawfully, the bank must not default a loan for any reason,” Ms Carnell said.

“The report also said conditions must be removed where banks could unilaterally value existing security assets during the life of a loan; and not invoke financial covenants or catch-all ‘material adverse change’ clauses.

“It shouldn’t have taken so long, but we finally have a situation where banks will be treating small business clients as partners and share some of the risk. Currently, the contractual relationship is one-sided and unfair.”


Major bank shakes up SME loans approach
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