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In his recent address to the nation, President Cyril Ramaphosa announced a raft of socio- economic relief measures, including the COVID-19 Term Loan Scheme for Small and Medium Enterprises.
The initiative is the result of commercial banks working with the National Treasury and the South African Reserve Bank to provide government-guaranteed loans to small and medium- sized businesses that may not be able to meet their financial obligations during the lockdown and when the economy reopens.
The intended recipient business of the government sponsored scheme are as follows:
Only companies that would struggle to survive as a result of the Covid 19 pandemic is the intended targets
Those business that would receive support through normal banking practices is excluded from the scheme
The scheme is intended to support the small to mid-tier corporates
A business that was already in stress before the Covid 19 stress, will not qualify
FREQUENTLY ASKED QUESTIONS:
What are the Qualifying criteria?
The initial qualifying criteria have been listed as businesses that:
Are a company, statutory body corporate, close corporation, a sole proprietorship, trust or partnership, association, joint venture or any similar entity, but excluding state- owned entities, listed companies and companies with capital market funders or funding instruments
Have an existing banking relationship with Standard Bank
Have an annual turnover of R300m or less, measured at a group level (most recent financial year or the 12- month period ending on 29 February 2020);
Are in good standing with the Bank as at 29 February 2020
Are registered with the South African Revenue Service (SARS)
Have no existing capacity to borrow that can help alleviate financial distress; this means that you do not have an existing overdraft facility(ies) and / or other general short-term baking facilities that you can use for working capital purposes.
Are in a state of financial distress due to being negatively impacted by the COVID-19 lockdown and the resultant slowdown in the economy
What are the key features of the Covid-19 Term Loan?
Loans are available for business operational expenses for a period of three (3) months
Approval of applications for qualifying businesses is subject to the Bank’s risk-evaluation and credit-application processes. The Bank holds the right to decline an application based on its assessment
A business can only apply for one COVID-19 loan from one bank
These loans will be offered at a single agreed lending rate by all participating banks, currently set at Prime Interest Rate
No additional administration and/or initiation fee will be charged for these loans
Repayment of interest and capital starts after the initial six-month repayment holiday, and in month seven (7) businesses will start repayments for a period of five years (60 months) to pay back the loan amount in full. Borrowers can repay the loan ahead of schedule without incurring any penalties.
o Repayment of the loan will take place via debit order on a pre-determined date
o The Borrower will not incur early settlement penalties unless the Borrower settles the Loan in full before the expiry of the Agreed Term by means of a refinance
Interest will accumulate from the date on which the first drawdown on the loan occurs
The owners may be required to sign personal surety/personal guarantee
What type of expenses are considered part of Operating Expenses?
A loan will be granted to eligible businesses to provide liquidity in order to continue paying operating expenses over the next three months. Operating expenses includes items such as:
Salaries and wages (excluding any Retrenchment packages);
Rentals and lease payments (payment in relation to the rental machinery and equipment directly used in the production of goods and services in the business),
Utilities (electricity, water and gas),
supply chain costs (direct and indirect costs and expenses associated with the domestic and/or foreign supply of goods, materials and services to a business, including (without limitation), the costs and expenses of importing and exporting goods and materials, including all logistic and custom service providers relating thereto, upon the normal terms and conditions of the relevant suppliers), and
other operating expenses (security services to protect business premises; cash in transit services; cleaning and maintenance services),
What are the restrictions of the Covid-19 Term Loan?
The following restrictions apply should customers qualify for the loan:
Payment of dividends and shareholder loans payment is restricted until the COVID-19 loan has been repaid in full
The loan cannot be used to pay existing debts and is only for future operational expenses
The loan amount cannot be used to pay retrenchment packages
I’ve applied for other COVID-19 related loans; can I apply for this loan too?
Even if you have qualified for another relief loan, your business may qualify for this loan based on future operational expenses. More specifically, but not limited to:
Customers that applied for a SAFT loan can still apply for this loan, however, the SAFT loan amount should be deducted from the salary cost item
If customers have applied for other relief funding, e.g. UIF, and have been approved for such, please exclude the line items that have been catered for through other funding
Please note that only ONE COVID-19 Term Loan under this scheme can be applied for at ONE Bank.
How much can I borrow through the COVID-19 Term Loan?
COVID-19 funding is intended to provide immediate and short-term relief to enable businesses to continue operations while protecting jobs. Loan amounts will therefore be assessed based on the businesses’ operating expenses for a period of 3 months; no maximum borrowing limit has been defined, however businesses need to meet all criteria.
What information must I provide on the application?
In addition to information about the business and director/s, shareholder/s, partner/s, trustee/s, etc., the following information will be required:
View of business turnover over the last 12 months
View of business expenses, current debt repayments and net profit before tax over the last 12-month period
Business’s Income Tax Number
Description of how the business has been impacted by COVID-19
A list of the business’s monthly operational expenses for three months for which a loan is required, broken down by:
o Salary and wages payments
o Rental and lease payments
o Supplier payments
o Utility payments
o Other operating expenses
Please note that additional documentation may be requested once your application has been received, based on our assessment and verification criteria. This may include Annual Financial Statements and/or proof of income and expenses.
How long will it take to assess my application for the Covid-19 Term Loan?
Upon initial application, you can expect to hear back from us within 7 business days
If additional information is required, a new timeline will be estimated
Should you not hear back from us within 8 business days, please contact your relationship banker directly to request an escalation.
How can I apply for a COVID-19 Term Loan?
As a Standard Bank commercial customer, please contact your Relationship Manager.
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