In April National Treasury launched the Bounce Back Support Scheme, based on the Covid-19 Loan Guarantee Scheme, initially launched in June 2020 to assist businesses negatively affected by low economic activity following Covid-19 lockdown restrictions. The newly designed scheme comprises, for now, a loan guarantee mechanism of R15 billion. The Bounce Back loans will be accessible through any participating banks, Development Finance Institutions (DFI) or non-bank SME finance providers wishing to offer the facility to their clients.
Bounce Back loans will be at a preferential, capped rate (repo plus 6.5%), and government will share the risk of non-payment with the participating banks, and other lenders, by guaranteeing the first 20.5% of losses. The participating banks will do the assessment, and they can consider loans from R10,000 up to R10 million, with a maximum turnover of R100,000.
The National Treasury provides a guarantee to the Reserve Bank, and the Reserve Bank will lend to participating banks at the repo rate (currently 4.25 per cent) plus a 0.5 per cent once-off charge of the amount disbursed. Participating banks will lend this money as well as their own funds for the unguaranteed portion (79.5%) of the loan amount (which is raised by the individual banks, DFIs and non-bank SME finance providers through their usual funding channels) to small and medium-sized businesses at a floating interest rate of no more than the repo rate plus 6.5%.