Covid-19 loan guarantee scheme is now operational
The initiative is aimed at providing loans guaranteed by government to small and medium-sized businesses.
The Covid-19 loan guarantee scheme announced by President Cyril Ramaphosa in April is now operational, allowing eligible businesses with an annual turnover of less than R300 million to apply.
The initial set of participating banks include Absa, First National Bank, Investec, Mercantile Bank, Nedbank and Standard Bank.
The initiative is aimed at providing loans guaranteed by government to small and medium-sized businesses.
The loan is only to be used by businesses to pay operational expenses such as salaries, rent, utilities and ordinary-course supplier payments. Businesses are not allowed to use the loan to pay dividends, make investments, pay bonuses or pay off other loans than businesses may have.
The loan is disbursed to the customer in up to three monthly instalments, after which no payment is expected from the business for a further three months. Businesses have five years to pay off the loan and associated interest. The interest rate is fixed at the repo rate plus 3.5 per cent.
A joint Media Statement by @TreasuryRSA , @SAReserveBank and @BankingZA on Loan Guarantee Scheme. For full documentation, please click here: https://t.co/5wDMcj9opv pic.twitter.com/63SSoLZqa4
— National Treasury (@TreasuryRSA) May 12, 2020
Businesses also need to be in good standing with their banks when they apply for the loan. They must be up to date with other loan payments or be an account holder without any loans at the end of February this year.
Businesses must have an existing relationship with the bank granting the loan, registered with Sars and be financially distressed as a result of Covid-19.
Government and commercial banks are sharing the risks of these loans. The National Treasury initially provided a guarantee of R100 billion to this scheme with the option to increase the guarantee to R200 billion.
In order to apply, businesses must contact their primary or main banker.
For further information, visit www.treasury.gov.za or contact your bank.
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