South Africa’s major banks launched their online portals providing government-backed loans to small and medium-sized businesses that may not be able to meet their financial obligations during the lockdown and when the economy reopens.
The loans may only be used for operational expenses such as salaries, rent and lease agreements, contracts with suppliers, utilities, etc., for a period of three months. The loans may not be used for other purposes, such as paying dividends.
“The National Treasury has provided a guarantee of R100 billion to this scheme, with the option to increase the guarantee to R200 billion if necessary and if the scheme is deemed successful,” said Treasury, Sarb and the Banking Association of SA (Basa) in a joint statement.
Requirements for loan applicants
Companies applying for the Covid-19 SME loan schemes must:
Have an annual turnover of R300 million or less measured at a group level
Be in good standing with the bank as at 29 February 2020
Be registered with the South African Revenue Service (Sars)
Have been negatively impacted by the Covid-19 lockdown and the resultant slowdown in the economy
Have no existing capacity to borrow in order to alleviate financial distress. This means that you do not have existing overdraft facilities and/or other general short-term banking facilities that you can use for working capital purposes
Are in a state of financial distress due to being negatively impacted by the Covid-19 lockdown and the resultant slowdown in the economy
Are a company, statutory body corporate, close corporation, sole proprietorship, trust or partnership, association, joint venture or any similar entity, but excludes state-owned entities, listed companies and companies with capital market funders or funding instruments.
The conditions applicable to the loans are:
Loans are available for business operational expenses such as salaries, rent and lease agreements, contracts with suppliers, utilities, etc. for a period of three (3) months
Approval of applications for qualifying businesses are subject to the Bank’s risk-evaluation and credit-application processes. The bank holds the right to decline an application based on its assessment
A business can only apply for one Covid-19 loan from one bank
These loans will be offered at prime interest rate
The loan repayment period is 66 months, with the first 6-months being a payment holiday; at the end of month 7, businesses will be expected to start repaying the loan over the next 60 months (5 years)
Interest will accumulate from the date on which the first draw down on the loan occurs
No additional administration and/or initiation fee will be charged for these loans.
Contact us now for assistance with preparing your financial statements as part of the application process. This is what is required (though requirements may vary slightly from bank to bank):
Latest annual financial statements.
Management accounts (up to 29 February 2020).
Cashflow forecast for next 12 months.
Optional: Personal position statement (PPS) for owners willing to provide personal surety.
Standard Bank: For more information on Standard Bank’s Covid-19 loan scheme, click here.
Nedbank’s loan scheme application form and conditions can be found here.
Absa’s financial relief schemes can be found here.
FNB’s financial relief schemes are available here.
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