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Relief options for small businesses

Apr 13, 2020

Relief options for small businessesThere are various financial relief options available for small businesses, from tax relief to soft loans and even grants for sole proprietors.

SME tax relief

PAYE: Tax-complaint small- to medium-sized business with turnover less than R50 million can defer payment of 20% of their employees tax (PAYE) without penalties and interest.

Provisional tax: Small businesses will be able to defer their first and second provisional tax liabilities. 15% of the estimated tax liability for the year of assessment is to be paid as the first provisional tax payment (instead of 50%). 50% is to be paid as the second provisional tax payment; and 100% of the estimated tax liability will need to be paid by the third provisional top-up date to avoid interest. SARS has indicated that this tax relief may be extended to sole proprietors.

ETI: Employers to claim an additional employment tax incentive relief (ETI) from 1 April 2020 to 31 July 2020: an additional R500 per qualifying employee; plus R500 for each qualifying employee (18 to 29 years) who is no longer eligible for the ETI as the employer has claimed ETI on those employees for the qualifying 24 months; plus R500 for each employee between 30 to 65 years who does not qualify for the ETI due to age.

SME financial relief

Small businesses can apply to the Debt Relief Fund via the Department of Small Business Development. This will only be available to businesses affected by COVID-19 and not those who were in financial stress prior to the crisis. Small businesses need to register at www.smmesa.gov.za

Small businesses who are providing essential goods and need additional cashflow can apply for a soft loan through the Growth and Resilience Fund. This funding can also be accessed through the government small business fund website.

All four major banks are facilitating interest-free loans from the South African Future Trust (SAFT), established by Nicky and Jonathan Oppenheimer. Small businesses who cannot continue to pay their employees can apply for funding of R750 per employee per week, for a period of 15 weeks. Funds are to be paid directly into the employees’ accounts. During this initial COVID-19 period, SAFT offers a five-year interest-free loan to the business. There is no minimum monthly payment requirement and the loan only needs to be repaid by the employer at the end of the period. Contact your bank for more information.

Business/Partners is managing the R1bn Sukuma Relief Programme set up by the Rupert Family. This is a distinct and separate financing programme available for both sole proprietors and formalised SMEs. Ben Bierman, Managing Director at Business Partners Limited (BUSINESS/PARTNERS) says this will comprise grants and low-interest-bearing loans with a 12-month repayment holiday.  Qualifying formal sole proprietors will receive a non-repayable grant of R25 000. Formal close corporations, companies and trusts will be eligible for an unsecured loan ranging between R250 000 and R1 000 000, with no repayment obligations or interest incurred for the first 12 months, in addition to a R25 000 grant. In terms of necessary criteria, Bierman says that close corporations, companies or trusts must be registered, tax- and regulatory-compliant South African businesses that can prove viability prior to the arrival of the pandemic.

“When applying, these entities will therefore be required to submit documents and supporting evidence to corroborate that it is a viable business that was impacted by COVID-19. This proof can be a demonstration of a decrease in turnover, erosion of working capital, or inability to pay salaries. Similarly, formal sole proprietors will need to provide proof of an active bank account to show business activity prior to the outbreak of the pandemic and provide evidence of tax compliance,” he adds.

More information can be found at finance.businesspartners.co.za

This article first appeared in City Press.

2 Comments

  1. How does relief apply to businesses that only started operating at the beginning of this year, and went straight into the pandemic? Proving viability will be a real test since many would not have any solid financials, other than mostly expenses of setting up business.

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Maya Fisher-French author of Money Questions Answered

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