The coronavirus is affecting the whole global economy, due to this many businesses are being forced to shut down or offer limited services. In South Africa, the president has implemented a 21-day lockdown in which only businesses offering, what has been considered, essential services are open. Many small businesses are not operational right now including businesses such as restaurants. They will not be making any income for the duration of the lockdown and its not clear how the situation will be in the weeks following the lockdown.
What is clear is this will have a huge financial impact on the businesses and their employees, some of whom will lose their jobs during this period. The lockdown will have a significant financial impact on the South African economy.
For businesses that have been financially impacted who want to get funding to help them grow and adapt what sort of funding is available?
We will look at the different funding options for SME’s below.
Funding for Small Businesses to recover from effects of the coronavirus
Small Business Funding Platforms
Traditionally getting funding for small businesses has been a difficult process filled with lots of paperwork, long queues and a long waiting period if they applied using a traditional bank. With the advancement of technology and a rise ion FinTech, there is a new funding model that takes just 24 hours to get approval that gives small businesses funding from R20,000 up to R1,500,000. Platforms such as Lulalend’s Business Loan platform make this possible using modern technology to assess businesses.
Government Debt Relief Fund
Due to the coronavirus, the government will be setting up a Debt Relief Fund, the Department of Small Business Development has been inundated with inquiries from SMME’s which has led it to a Debt Relief Fund for businesses affected by Novel coronavirus, “The Debt Relief Fund is aimed at providing relief on existing debts and repayments, to assist SMMEs during the period of the COVID-19 State of Disaster,” the department said.
To access this fund businesses must show a direct link between the virus and its effect on their operations.
In a press briefing, the government announced qualifying businesses must meet the following criteria:
- 100% South African-owned
- 70% of employees must be South African
The fund will offer working capital finance, bridging finance, equipment finance, and the amount required will be based on the funding needs of each business.
To apply businesses must register on the SMME South Africa portal at www.smmesa.gov.za.
South Africa’s richest businessmen, Johann Rupert, Nicky Oppenheimer, and Patrice Motsepe have each pledged R1 billion to support small businesses affected by covid19.
The Johann Rupert fund will be administered by Business Partners Limited.
What are the criteria for accessing funds:
Conditions are still being finalized but to the Regional General Manager of the fund, Refilwe Moloto:
“They must be tax compliant South African businesses… we require financial statements… things that corroborate information that this is a viable business that was impacted by Covid-19…”
“Some sectors have been impacted more than others. Tourism, the entertainment industry, restaurants… but we want to cover broadly… manufacturing…”
“We thought long and hard… the idea is to provide cashflow support… We’re looking at a combination of grants and low-interest loans… For instance, it could be an initial grant and a loan with no interest for the first 12 months… We’re looking at debt finance over 60 months…”