South African banks are now ready to accept loan applications from COVID-19 distressed businesses.
This was revealed on Tuesday by the National Treasury, the South African Reserve Bank and the Banking Association of South Africa.
The development comes after the loan guarantee scheme announced by President Cyril Ramaphosa in April is set to operate from today, 12 May 2020.
“The initial set of participating banks (Absa, First National Bank, Investec, Mercantile Bank, Nedbank and Standard Bank) are ready to accept loan applications from distressed businesses which bank with them,” said the parties in a joint statement.
The activation of the loan guarantee scheme follows the finalisation of legal details by the three parties.
The loan guarantee scheme is an initiative that provides loans, guaranteed by the government, to businesses with an annual turnover of less than R300 million to meet some of their operational expenses.
“Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements, contracts with suppliers, etc,” said the Treasury.
Government and commercial banks are sharing the risks of these loans.
Initially, Treasury provided a guarantee of R100 billion to this scheme, with the option to increase the guarantee to R200 billion if necessary, and if the scheme is deemed successful.
Further queries should be directed to the individual banks, which are administering the scheme.