COVID-19 Loan Guarantee Scheme reviewed to simplify process: Treasury

National Treasury says on Sunday it has reviewed the COVID-19 Loan Guarantee Scheme to allow the fund to be easily accessible to businesses.

The scheme was created to assist qualifying businesses negatively affected by the COVID-19 lockdown.

Treasury said in a statement that some of the changes made include more discretion and less restriction in the bank credit assessments and loan approvals.

In the video below, the SABC looks at how businesses will benefit from COVID-19 stimulus package. 

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Applicants can also now access the loan over a longer period.

Funds borrowed from the scheme, through banks, can be used for operational expenses, such as salaries, rent and lease agreements and contracts with suppliers.

The loans are granted at a prime rate and repayment may be deferred for a maximum of one year after the loan was taken.

Businesses will then be required to repay the loan over five years.

Changes implemented

  • Business restart loans will now be available to assist businesses to begin operations when economic activity opens.
  • More discretion and less restriction in the bank credit assessments and loan approvals. Banks may use their discretion on financial information required such as financial statements. Suretyships or guarantees may also be required.
  • Applicants can now access the loan from three months to a maximum of six months. The size of the loan is still calculated on operating expenses.
  • The interest and capital repayment holiday have been extended to three months to a maximum of six months.
  • 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 been moved back to 31 December 2019 from 29 February 2020. This will help businesses that were already experiencing financial difficulties before the COVID-19 lockdown.
  • Sole proprietorships are now included.

Treasury has encouraged qualifying businesses to their primary or main banker for further information on the scheme and the qualifying criteria.

Below is the document from National Treasury explaining the Scheme and who it applies to.

Source: SABC News (sabcnews.com)