Economic environment shows businesses have mixed needs, says FNB
Daniel Kaan, FNB Business Transact Pillar chief executive, said some sectors were taking a more cautious approach considering the economic uncertainty coupled with the vaccine roll-out plan, while others were making use of the opportunity to excel.
“The environment over the last year has also seen some businesses not being able to survive and new businesses being started on the back of the high unemployment rate. The comparable need for credit over the last one, three and five years is in line with the number of businesses that are operational and linked to general business confidence,” said Kaan.
The financial institution said businesses should ensure they handled their general affairs well and remained in good standing with their existing commitments. Furthermore, they should understand their needs and balance that with the cost at which financial assistance came. Kaan said this would ensure that the business did not end up in a far worse off position within a couple of months.
FNB said that it would continue with its long-standing approach of responsible lending and would always assess the businesses on their own merits when they applied for credit. It urged businesses that needed guidance to reach out to their bankers and have an honest discussion about their plans.
Derek Venter, chief risk officer for Everyday Banking at Absa Retail and Business Bank, said one of the most pertinent points emerging from their efforts to support business clients was a need to tailor specific solutions to suit each client’s unique circumstances and funding needs.
He said it was against this background that they offered bespoke solutions for businesses to assist them during this difficult time, based on their specific requirements and operations.
“Each application is different, evaluated individually, and its outcome depends on the specifics of the case. We have assisted a significant number of clients with bespoke solutions over the last few months. In some cases, the most appropriate option is to only consider the SARB [SA Reserve Bank] Loan Guarantee Scheme; in other cases, it is considered in conjunction with other funding solutions and payment relief options,” said Venter.
The Banking Association South Africa (Basa) said in its Covid-19 Loan Guarantee Scheme Update earlier this month that as of March 27 this year, R18.16 billion in loans had been approved by banks and taken up by small businesses.
The Covid-19 Loan Guarantee Scheme was initially scheduled to expire on April 11 this year but would remain in operation for a further three months to allow those who have qualified for a loan to continue to access their funds and for applications in process to be finalised. Basa said the scheme would not be extended beyond July 11.
The institution said there has been little demand for the Covid-19 loans since the beginning of the year, despite further economic disruption caused by the pandemic.
Demand for loans from the scheme were expected to decrease even further in the coming months. Basa’s review of the scheme indicated that qualifying business owners were reluctant to take on more debt in a weak and uncertain business environment, or they had made their own financial relief arrangements directly with their banks.
The Loan Guarantee Scheme was only a small part of the relief that banks offered their clients and customers in financial distress.
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