Small businesses can now apply for the government’s R100 billion COVID-19 loan guarantee scheme.

If your turnover is less than R300 million, you qualify for this COVID-19 SME support programme.

It is a joint initiative by the National Treasury and the banks. The South African Reserve Bank will manage the scheme and release annual reports revealing how much funds each bank has issued to SMEs under the scheme. This report will include default rates.

On 12 May, the National Treasury, the Banking Association of South Africa, and the South African Reserve Bank, released a joint media statement about the COVID-19 support scheme.

“Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements, contracts with suppliers, etc. Government and commercial banks are sharing the risks of these loans,” reads the statement.

Does your SME qualify for the scheme?

To qualify, small businesses must meet the following criteria:

  • Existing relationship with the bank
  • Good standing with their bank, e.g., up to date with other loan payments
  • Good standing with SARS
  • Must be in financial distress because of COVID-19

Loans will be released in three installments. SMEs get five years to pay off the loan, and banks may ask for collateral, according to a FAQ about the scheme.

Other conditions include an interest rate fixed at the repo rate plus 3.5%. Banks cannot change this rate;

“Businesses may not use these loans to pay dividends, make investments, pay bonuses or pay off other loans that the business may have,” reads the FAQ.

COVID-19 SME funds update

The announcement comes after the National Department of Small Business said it was running out of funds for COVID-19 support.

Khumbudzo Ntshavheni, the Minister of Small Business Development, told MPs the R530 million the department has set aside for small business relief was not enough to meet the demand, reports Fin24.

“Our pot or kitty is too small…we are working with National Treasury to make sure more money in the scheme is available”.

On Twitter, many SMEs have expressed frustration with the process. Some say they have not received feedback on the status of their applications. The department said all business owners should have heard the outcome of the applications by 1 May.

The department publishes a progress report on the debt relief funds on its website,

These were the latest debt relief scheme figures available on 13 May:

  • Number of SMEs approved for funding: 1268
  • Approved amount: R 433m
  • Number of applications: 26039
  • Complete applications in progress (processed by SEFA): 6741
  • Incomplete applications resulting: 19298

Ntshavheni said the Unemployment Insurance Fund was helping to support SMEs.

The UIF released the following progress report on COVID-19 support:

  • R11-billion had been paid out over 2million workers
  • R100 million has been held back because the UIF can’t verify these workers bank details
  • R2 billion can’t be paid out because the UIF is still waiting for more details from companies

For more on accessing the government relief, read our simple guide on COVID-19 SME Relief options.

 

 

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