NOMPU SIZIBA: The Covid-19 Loan Guarantee Scheme has been reviewed following complaints that it was difficult for many SMEs to access. Up to R200 billion is to be made available for this facility, which is to assist SMEs to recover following the impacts of Covid-19. They will be able to use the funds loaned to them for operational expenses, such as salaries, rentals, lease agreements and contracts with suppliers. The loans are granted at a preferential rate and the start of repayments on the debt can be deferred by up to one year, but must be paid over a five-year period.

So to tell us how the net has been cast more widely to help more SMEs, I’m joined on the line by Simone Cooper. She’s the head of business banking at the Standard Bank Group. Thanks very much, Simone, for joining us. Up until the time that the COVID-19 Loan Guarantee Scheme provisions were reviewed, how many businesses had taken advantage of the facility? If you’re only able to speak in terms of Standard Bank, that’s also fine.

SIMONE COOPER: Hi and thank you. I’m not able to even speak on Standard Bank, given that the Reserve Bank and National Treasury are the only ones aloud to talk about the numbers. At an industry level, there’s about R12.5 billion that has been done under Phase 1.

NOMPU SIZIBA: Right. So what are the key elements that were changed to make it easier for banks like yourself to assist SMEs at this very difficult time?

SIMONE COOPER: Key changes to the scheme, firstly in terms of the product. Under Phase 1, a business is able to obtain up to two months’ worth of operating expenses, and they will then receive a three-month payment holiday thereafter. So effectively they would only start paying in six months‘ time, and the loan would be amortised over a five-year period thereafter. Under the new scheme a business can get up to six months’ worth of operating expenses and six months’ worth of a payment holiday. So it effectively will be a year before they would begin paying the facility, which would then be over a five-year period.

And the other key change is that there is the removal of the turnover cap. Under Phase 1, businesses with a turnover of up to R300 million were able to apply for the relief; and under Phase 2 the turnover the cap has been removed. However, there is a maximum loan size of a R100 million that is allowed on the scheme.

Effectively, it opens it up to much wider group of businesses. I think that the other piece around it is that the original facility under Phase 1 was intended to provide relief for specific payments that businesses would need to make, because they had not been trading during the period or ultimately would be trading at very low levels. Under the new scheme, effectively, it’s also being termed a Business New Start Facility, so allowing businesses who perhaps haven’t had turnover or reduced levels of turnover for the past two months can use this money for a new start and get started again.

NOMPU SIZIBA: That’s very positive, indeed. SME is such a broad term, but just give us a sense of the kind of businesses that you’ve been helping so far. And could they be a small player, like a one-man or one-woman show with a couple of employees, for example? In cases like that, what would they need to show in terms of track record?

SIMONE COOPER: You’re absolutely right, SME is a very broad term. We’ve helped businesses across all sorts of industries. We’ve had retail businesses, construction businesses, various entities. So I think that the scale and scope of the industries that have been affected has been so widespread, I suppose, other than customers who or businesses that are operating within the agricultural value chain, pretty much everybody has been impacted. So we’ve helped across the board. The one-man businesses are absolutely able to apply. So folks can apply and obviously businesses, more formalised businesses and businesses that operate out of TTY with one or two employees are also able to apply.

NOMPU SIZIBA: Naturally, there’ll be an element of due diligence that takes place by the banks to ensure that the right businesses are being given loans. But just tell us about the risk distribution, how it’s going to work between the Reserve Bank and the banking industry in the event that there are some defaults.

SIMONE COOPER: Sure. Firstly, I think the way that the scheme is designed is on a not-for-profit basis for the banking industry. The way that it works is that, at a bank level, the banks will absorb 6% of the first loss on a portfolio basis, and thereafter the guarantee from National Treasury will kick in. So, for example, if a bank did a portfolio of loans worth R5 billion, they would have to absorb 6% of that R5 billion before they could claiming against the guarantee.

NOMPU SIZIBA: For business people who happen to be Standard Bank account holders, what’s the process they must follow in order for them to qualify for assistance from you guys under this Covid-19 Loan Guarantee Scheme?

SIMONE COOPER: The way that we have approached it is on our website. We have a Covid-19 link and, if you click through those pages, you will see that there is a facility to apply online. The reason why we’ve gone with that approach is that, given that most businesses are locked down and it’s all happening in lockdown and not everyone is working from home, it’s actually much easier for them to apply online. And it also means that we can process the applications far more effectively. So businesses must apply online, and there’s an application form that they would fill in. Alternatively, the businesses can contact their banker, or …… manager who will guide them through the process as to how they would go about applying for it.

NOMPU SIZIBA: That was Simone Cooper. She’s the head of business banking at Standard Bank.