CAPE TOWN - “Not in good standing” or applying for loans that were too big to be affordable were the main reasons why banks had rejected 35 percent of the applications from struggling businesses for financial relief through the Covid-19 lockdown.
If a company is “not in good standing” with a bank it usually means the company is not complying with some of the applicable regulations.
The Banking Association of South Africa (Basa) said yesterday (thur) that the banks received 42 202 applications for loans from their clients for Covid-19 Loan Guarantee Scheme as at August 29, and the average size of loan paid out was R1.27 million.
Of all the applications, 25 percent had been approved by banks and taken-up by businesses, while 37 percent were being assessed. Thirty-five percent were rejected because they did not meet eligibility criteria for the loan, as set out by the Treasury and the SA Reserve Bank or because they did not meet banks’ risk criteria.
The main reasons for rejections was that the businesses were not in “good standing” or the requested loan value was too high and the repayments were deemed unaffordable for the business.
Basa said the banks, SA Reserve Bank and National Treasury were continuing to review the reasons for the rejection of loan applications, with a view to making the scheme even more accessible, while balancing the risks to taxpayers.
The Covid-19 Loan Guarantee Scheme is a partnership between the National Treasury and the South African Reserve Bank (SARB) and commercial banks, that offers businesses loans to support them until “new normal” economic activity can resume.
By August 29 banks had provided R48.04 billion in relief – R33.49bn in payment breaks and R14.54bn under the loan guarantee scheme – to South African businesses and individuals who were financially distressed due to the Covid-19 pandemic and national lockdown,
The R14.54bn under the Covid-19 Loan Guarantee was up by R1.15bn from August 15. This represented an increase in the rate of uptake from the two weeks to August 15, when only an additional R136m was extended.
Since the beginning of August banks have been granted more flexibility when assessing the ability of businesses to repay their loans as economic activity resumes.
Aside from the Covid-19 Loan Scheme, banks had also offered financial relief of R19.48bn to individuals and R14.01bn to commercial and small and medium enterprises. This support had reduced demand for assistance from the government-backed scheme.
Banks were continuing to offer financial relief to their customers, Basa said.
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