Covid-19: How the R200bn loan scheme will work for struggling companies
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CAPE TOWN - Details have been released of the R200 billion loan scheme aimed at providing an estimated 70 000 struggling businesses, with some 3 million employees, with another lifeline through the Covid-19 crisis.
The credit guarantee scheme was first announced on Tuesday night by President Cyril Ramaphosa as part of the R500bn fiscal stimulus package. The scheme will be facilitated by the major bank and the scheme is also in partnership with the SA Reserve Bank.
Mercantile Bank chief executive Karl Kumbier, together with Capitec bank said the lockdown had significantly impacted businesses as they had been unable to trade while often still having to try and pay salaries, and their suppliers.
“We’ve worked with the government, SARB and five other banks to put this initiative in place – it’s been amazing to see what we can do when we work together. We’re going to get out there and get the economy up and running again as the lockdown eases,” he said.
A number of banks are likely to be able to roll out the scheme to eligible businesses before the end of the month, Investec said in a statement.
The scheme will initially be eligible to companies with a turnover of less than R300 million per month, and is aimed to assist companies with operational costs, support on salaries, rentals and the payment of suppliers.
Eligible businesses have to be registered with SARS, in good standing with their banks, have no further capacity to borrow and in financial distress due to the lockdown.
The five year loans would cover three months of operational costs in the businesses, with the loan drawdown monthly and all the participating banks would offer the same loan terms, Businesses would not have to pay capital and interest on the loans for six months from the first drawdown. Business owners may be required to sign surety for the loan.
The credit guarantee is underwritten by the SA Reserve Bank, which in turn is backed by the National Treasury.
According to a document seen by Business Report, the banking industry is facing a sizeable loss as a result of the failure of businesses due to the lockdown, so any government intervention to assist distressed businesses could preserve the income generating capacity of banks for future economic cycles, and reduces the probability of losses being realised through the profit and loss accounts of the bank in the current financial cycle.