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Covid-19 Loan Guarantee Scheme reviewed – Now easier to access

National Treasury, the South African Reserve Bank and the Banking Association of South Africa, released an update on the Covid-19 loan guarantee scheme. The scheme was set up to help ease some pressure on qualifying businesses negatively affected by low economic activity following the global lockdown imposed to reduce the spread of COVID-19.

According to the statement, the scheme was reviewed to make it easier to access. “Some of the changes include that bank credit assessments and loan approvals will be more discretionary and less restrictive, in line with the objectives of the scheme. In addition, clients are now able to access the loan over a longer period.”

Following a review of the scheme, the following changes were announced:

Business restart loans will now be available, to assist businesses that are able to begin operating as the economy opens up.
Bank credit assessments and loan approvals will be more discretionary and less restrictive. Banks may use their discretion on financial information required, for example bank or financial statements, where audited statements are not available. Suretyships or guarantees may also be required. The provisions of the National Credit Act and Financial Intelligence Centre Act remain applicable, however.
The draw down period has been extended from three months to a maximum of six months. For example, a R6 million loan can be drawn down over six months, at R1 million a month if the business qualifies. The size of the loan is still calculated on operating expenses.
The interest and capital repayment holiday was extended from three months to a maximum of six months after the final draw down. For example, in the case of the same R6 million loan, drawn down at R1 million a month for six months, repayments will only be required from month 13.
The turnover cap has been replaced with a maximum loan amount of R100 million. Banks may also provide syndicated loans for loans larger than R50 million.
The test for good standing has now moved back to 31 December 2019 from 29 February 2020, which will accommodate firms which were already experiencing cash-flow problems in February.
Sole proprietorships are now explicitly included. For sole proprietorships and small companies, salary-like payments to the owners (drawings) are included in the use of proceeds. Security, suretyships or guarantees are not explicitly required.

According to the statement, eligible businesses should contact their primary or main banker for further information on the scheme and the qualifying criteria.

Click here to download the media statement.

Click here to download the FAQ about the Covid-19 Loan Guarantee Scheme

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