Loan scheme now available for small businesses

Loan scheme now available for small businesses National Treasury recently announced that it had provided a guarantee of R100bn to banks to provide additional funding for small businesses. This will be increased to R200bn if it is necessary and the Scheme is successful.

“This guaranteed loan scheme will bolster efforts made in both the private sector and government to aid small businesses in South Africa,” says Funeka Montjane, Country Executive, Personal and Business Banking South Africa.

“We have been in constant consultation with Government about the implementation of the Scheme and are now ready to receive applications.”

This is over and above the existing measures announced, including funding from the Department of Small Business Development, the South Africa Future Trust fund and debt relief holidays.

Loans will be made available to small businesses with an annual turnover of less than R300m, however, the loans may only be used for a business’s operational expenses such as salaries, rent, lease agreements and contracts with suppliers. Loans will cover up to three months of operational costs.  The loan attracts an interest rate of prime and must be repaid over a five-year period.

The loan is also only for small businesses that were in good standing with the bank as at 29 February 2020 and that have been negatively impacted by the COVID-19 lockdown and resultant slowdown in the economy. The business must also be registered with the South African Revenue Services.

Sandra Beswick, business rescue expert at Fluence Capital warns that small businesses should only take on loans if they have a plan on what to do with the funds.

“Don’t just take on additional debt because it is available. These often require personal surety and in some cases banks are even insisting on personal guarantees that the loans are protected from business rescue.”

FNB provides grants to micro-entrepreneurs

FNB has committed R8 million in grant funding to enable micro-entrepreneurs to resume work during and post the COVID-19 pandemic.

FNB has partnered with Supplier Development Initiatives (SDI) to assist over 2 170 entrepreneurs who provide access to their services through Uber/Bolt, SweepSouth, Loadit, Wastepreneurs and Tradeway. SDI operates under the banner of SDI Force, an existing services-on-demand platform that aims to uplift micro-suppliers across multiple industries.

The grant funding will be used to enable micro-entrepreneurs to repurpose and acquire assets and Personal Protective Equipment to enable them to deliver services in a safe manner in the current COVID-19 environment.

The aim of this initiative is to get micro-entrepreneurs back to work as soon as possible to reduce the support that would otherwise be required from relief programmes to sustain them and their families. Many have no source of income currently, yet could play a significant role in assisting the private and public sector through provision of their services.

Heather Lowe, Head of SME Development at FNB Business, says “SweepSouth is a perfect example. Due to an inability to get back to work until a lower lockdown level, the ladies are not generating an income, with many of them being sole breadwinners and single mothers. Currently they are forced to rely on relief programmes to provide for their families. They can play a meaningful role by cleaning and sterilising office buildings and public areas at scale, if provided with the means to do so safely and effectively, and most importantly, if they are visible to the sectors that are procuring these services.”

Existing financial support

COVID-19 TERS fund

R14bn in benefits paid to employees. 2.5 million employees have received the benefits. Submission is done at  uifecc.labour.gov.za/covid19.

SMME Debt Relief Finance Scheme:

  • Loans to businesses affected by COVID-19. Businesses must be compliant with SARS and UIF (registration with UIF is required pre-application, if not already registered).
  • Need to register on the SMME database and apply at www.smmesa.gov.za.
  • The facility will offer working capital only – strictly direct costs which should be auditable.
  • Maximum R500k per SMME will be considered, depending on requirements.
  • The term of the funding will be determined by the business cash flow, with a maximum moratorium of 6 months.
  • Loan facilities will be at an interest rate of Prime less 5%
  • In case of misuse of funds, the business or individual responsible will be liable for repayment at Prime plus 10%.

SMME Growth/Resilience Facilities

IDC Finance

  • Loans for entities supplying essential goods and services.
  • Company must have a track record in the above industries and have historical profitability.
  • Finance at prime plus 1%, limited to 3 months

South African Future Trust (SAFT)

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.

Sukuma fund

Business Partners is managing the R1bn fund set up by the Rupert Family and Remgro. There are separate financing programmes available for both sole proprietors and formalised SMEs. Currently they are not receiving new applications.

This article first appeared in City Press.

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