The covid-19 have dealt businesses and the economy of South Africa a heavy blow. Because of this, the revenue of many businesses continues to go down. Besides that, many people lose their jobs because of insufficient funds to pay their salaries. These and many more have been the situation of things in South Africa because of covid-19. The meaning of covid-19 loan, requirements, how the business can qualify, etc are all-inclusive in this article.
What is covid-19 loan in South Africa?
The South African Reserve Bank (SARB) and the National Treasury started the covid-19 loan. Also in partnership with members of the Banking Association of South Africa (BASA). The aim of the loan is to help businesses support the South Africa economy and save jobs of her citizens.
Covid-19 loan is the type of loan that the government of South Africa offers to small and medium-sized businesses. This loan will help them survive the ‘COVID-19’ recession with other changes to make the credit to be accessible. The government of South Africa knows that the revenue of businesses is dropping. Besides that, citizens of South Africa continue to lose their jobs. In order to sustain their jobs and keep businesses from closing down, the idea of covid-19 loan becomes wonderful.
What are the requirements for covid-19 loan?
You must provide some requirements that your lenders demand. Whether you’re taking a personal loan or a business loan. These requirements give the lenders enough details to approve your loan.
Some lenders could require the following items from businesses:
- The facility the business needs to fund especially, which is up to 6 months of qualifying expenses
- Present a cash flow projection. Also substantiate the facility you request
- Provide an account of the business’ year-to-date management accounts. Also note the current financial position and financial performance
- Most recent financial statements of the business
- Proof of South Africa Revenue Service (SARS) registration
- The business’ constitutional documents
- Ensure you did not apply for the same loan from a different lender
How can my business qualify for the covid-19 loan?
Qualifying for covid-19 loan boosts your chances of getting it. And this qualification process helps to place parameters to check the businesses that deserve it most.
The following is how your business can qualify for the covid-19 loan:
- You must be a company, statutory body corporate, close corporation, sole proprietorship, trust or partnership, association, joint venture or any similar entity. However, you must not be state-owned entities, listed companies and companies with capital market funders or funding instruments
- Your business has to be in good standing as at 31 December 2019
- They must register your business with SARS
- Your business must have no existing capacity to borrow
- Ensure that your business accrued negative impact of lockdown and requires funding to restart operations during different levels of lockdown
- You must not apply for this loan at any other lender.
Note: Each loan is subject to each bank’s credit application, risk evaluation, and granting process. They may require a personal guarantee. Also, having an existing relationship of either lending or transactional banking with a lender gives your business an upper hand.
How can I apply for the covid-19 loan?
You must make your loan request known before your lender approves it. For every form of loan, you must apply according to the way your lender operates.
Apply for the covid-19 loan in the following ways:
- You can apply online by visiting their website. Simply do it with your smartphone, tablet, or personal computer. Log into their website and follow the prompts
- Call their customer service representative. Make your loan request known to them and then follow their instructions on how to get your loan.
How long will the covid-19 loan last?
Before any business gets a loan, they usually find out how long the loan will dwell. The covid-19 loan tenure is from 6 months and above.
What are the things businesses can do with the covid-19 loan?
Unlike some business loans, covid-19 loans have dos and don’ts. This helps to guide how businesses make use of this limited fund. Otherwise, businesses will defeat the sole purpose the government of South Africa started this loan scheme.
The following are the things your business can do with the covid-19 loan:
- Your business can use it to pay salaries and wages to workers
- Pay rentals and lease payments
- Your business can use it to cater for the costs and expenses of importing and exporting goods and materials
- For utilities
- Use it for insurance premiums
- Other kinds of operating expenses that help to generate income
The following are the things your business cannot do with the covid-19 loan?
- You must not use the loan amounts to pay any distributions to stakeholders, trustees, directors, beneficiaries and partners.
- There is no prepayment or repayment of any existing bank debt facilities at any bank with the loan
Conclusion
The Small and Medium-sized businesses in South Africa have seen enormous disarray during the lockdown. Because the government of South Africa sought the right move to contain the spread of the dreaded coronavirus. Because of this, many businesses lost their revenue and people lost their jobs. And in the aim to reconcile the situation, the government of South Africa started the covid-19 loan. And this loan offers the lifeline to get businesses back to where they were before the lockdown.