Act immediately and decisively in planning for the survival of your business – using effective disaster management tools needed to weather the storm.
During his state of the nation address on 21 April 2020, President Ramaphosa announced, as part of the current phase 2 of South Africa’s COVID-19 economic recovery plan, that as much as R200 billion will be made available by way of a guaranteed loan scheme, in order to assist small and medium sized businesses that are experiencing financial pressure as a result of the COVID-19 pandemic, the former strict nationwide lockdown and the current limited commercial and economic activities. This initiative is structured by way of a partnership between the major commercial banks, the South African Reserve Bank (“SARB”) and the National Treasury.
In essence, the scheme is structured on the basis that profits and losses are ultimately shared between government and the banks and aims to ensure that affected and eligible businesses can survive long enough in order to financially recover. Simply put, the loans extended by the commercial banks to these businesses will be backed by a government guarantee. The SARB therefore makes available the funds to the commercial banks via a special repo window and these banks then grant loans under the scheme to eligible businesses, in accordance with their own lending criteria.
In terms of the first phase of this scheme, R100 billion will be made available for new loans, by the commercial banks, to their existing clients. The banks are, however, not obliged to extend any loans and their normal risk evaluation and credit-application processes will apply to any business that applies for these loans.
The following criteria are applicable in order to qualify for these loans:
The loans will be extended subject to the following conditions:
According to initial indications received from the major banks, the following documentation must be provided together with the application:
This new scheme will operate from 12 May 2020, as confirmed in a formal media statement from National Treasury, and is envisaged to assist over 700,000 businesses in staying afloat over the next few months. Should your businesses require financial assistance at this stage to support its operating costs, it is advisable that you contact your bank to discuss your options in applying for a loan.
For the moment and at date of publication, this is the information we have obtained. We will keep you updated should any further relevant information come to our attention.
Although we have used our best efforts to ensure that all information contained in this communication is accurate as at the date hereof, we cannot guarantee the accuracy thereof and recommend verification thereof before use.
This client information series is brought to you by the Siyandisa Trust in conjunction with PH Consult, a strategic partner of the Siyandisa Trust.
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