With small businesses facing unprecedented financial pressure, many banks have modified their lines … [+]
Small businesses have been put under immense pressure due to the spread of the coronavirus and the impact of its resulting illness, COVID-19. Small businesses are figuring out ways to retain their employees and pay them, which is heavily dependent on cash flow and access to financing. With so much commerce disrupted by COVID-19, having flexible credit to fall back on can be crucial. At the same time, the coronavirus has been affecting credit-based products, like loans and lines of credit.
Banks have taken on the challenges facing small business owners and regular consumers. The American Bankers Association has a large list of publicly announced steps banks have taken in response to the crisis. We went through the list and found some positive moves banks and lenders are making when it comes to business credit lines. Here are some of the effects COVID-19 is having on lines of credit for small businesses.
Impact of COVID-19 on Lines of Credit
In times of economic uncertainty or the beginning of a downturn, companies often need to draw on their business lines of credit to finance ongoing operations. Fortunately, during the current crisis, banks and lenders have largely adjusted their policies in regards to lines of credit to help small business owners weather this storm. Repayments have been deferred and credit limits raised, among other modifications. Let’s look at what banks are doing in response to small businesses impacted by COVID-19.
Deferment of Payments on Small Business Lines of Credit
A common financial assistance program that many banks are extending to small business owners is the ability to defer repayment on lines of business credit as well as business loans. For example, Fifth Third Bank is offering a payment deferral program for up to 90 days with no late fees on a range of loan modification options. Similarly, TD Bank is offering deferment of payments on small business loans and lines of credit. You can fill out a COVID-19 Business Relief Request Form online. Santander is also offering small businesses several options for loan products, including extensions and payment deferral.
Reduced Rates on Lines of Credit
In order to help small business owners with cash flow issues due to COVID-19, some banks are reducing their rates on business lines of credit. For example, U.S. Bank stands out in this regard, offering its Cash Flow Manager program. They’ve temporarily lowered rates on new secured and unsecured on-demand lines of credit, with credit lines ranging from $10,000 to $250,000. According to the program description, businesses could qualify for interest rates that are 1% lower than usual. The Mutual Savings Association is also offering temporary interest-rate modifications and short-term lines of credit to help small businesses impacted by the crisis.
Waiving Late Fees
Several banks are suspending the charging of late fees on business loan payments for term loans and lines of credit. At Huntington National Bank, for instance, small businesses have their late fees suspended through the end of May 2020, at which point the program may or may not be extended. Some more banks waiving late fees on lines of credit include:
Associated Bank: The bank will be suspending late fees on small business lending products in April 2020.
PNC Bank: Small business lending products, including business lines of credit, have modification options that all come with no late fees.
Umpqua Bank: For individual consumers and small businesses, the bank is waiving all fees associated with deferred payments on existing lines of credit.
Interest Free Lines of Credit
Several banks are offering interest-free business lines of credit for small business customers. WaFd Bank is one of the most notable here, offering five-year business lines of credit of up to $200,000 with a 90-day interest-free period for businesses impacted by COVID-19. Cumberland Valley National Bank is offering several programs for affected business customers, including an interest-only option and emergency lines of credit.
Increasing Credit Lines
Another common response by banks and lenders is increasing credit lines, which can be on existing business lines of credit or new ones, depending on the institution. Here are some notable banks that are increasing small business credit lines for their customers:
Brattleboro Savings and Loan: Offering business customers the ability to increase their credit lines during the crisis.
Primary Bank: Offering help to small businesses with increasing their lines or credit and drawing on existing lines.
Valley National Bank: For small business customers, the bank is offering increased lines of credit for impacted businesses.
West Pointe Bank: Offering increasing lines of credit for small business customers that support critical industries.
These aren’t the only banks making moves to help small business owners. If you’re a business customer at your bank, contact them over the phone for more details about the kinds of business relief programs they offer. Many banks will have more details than what is stated on their websites. Plus, banks are offering more relief programs beyond lines of credit, such as for personal and business credit cards, personal loans and lines of credit, and much more.