The COVID-19 loan guarantee scheme announced by President Cyril Ramaphosa is officially in full swing as of Tuesday 12 May.
The initial set of participating banks which are; Absa, First National Bank, Investec, Mercantile Bank, Nedbank and Standard Bank, are ready to accept loan applications from eligible businesses which bank with them.
The activation of the loan guarantee scheme follows the finalisation of legal details by National Treasury, the South African Reserve Bank and the Banking Association South Africa.
LOAN GUARANTEE SCHEME OPEN FOR APPLICATIONS
The loan guarantee scheme is an initiative to provide loans, guaranteed by the government, to eligible businesses with an annual turnover of less than R300 million to meet some of their operational expenses.
Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements and contracts with suppliers. Government and commercial banks are sharing the risks of these loans.
Initially, the National Treasury has provided a guarantee of R100 billion to this scheme, with the option to increase the guarantee to R200 billion if necessary and if the scheme is deemed successful. Eligible businesses should contact their primary or main banker.
More details on the loan scheme can be found in a Frequently Asked Questions guide posted here.
Further queries should be directed to the individual banks, which are administering the scheme. Jointly issued by National Treasury, The South African Reserve Bank and The Banking Association South Africa.
SCHEME SHOULD SUPPORT OVER 700 000 BUSINESSES
In his address to the nation on Tuesday 21 April, Ramaphosa announced a supplementary COVID-19 relief budget of R500 billion.
Ramaphosa said that while some measures were providing obvious relief to many companies and workers, it was clear that more had to be done for the economy.
“We will, therefore, be introducing an R200 billion loan guarantee scheme in partnership with the major banks, the National Treasury and the South African Reserve Bank. This will assist enterprises with operational costs, such as salaries, rent and the payment of suppliers,” he said.
Ramaphosa said that in the initial phase, companies with a turnover of less than R300 million a year would be eligible.
It is expected that the loan scheme will support over 700 000 firms and more than 3 million employees through this period.