Mercantile Bank and Capitec Bank had the privilege of working with other banks, the South African Reserve Bank, and the Government (through National Treasury), to develop a R200 billion loan guarantee scheme (COVID-19 SME Loan) for small and medium enterprises in response to the lockdown period’s detrimental effect on the economy, businesses and their employees. The purpose of the loan guarantee scheme is to provide businesses impacted by COVID-19 and in financial distress with assistance to cover operational expenses where businesses’ cash flow is insufficient to do so as a result of the Declaration of a National Disaster.

Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements, utilities, insurance premiums and supply chain costs, thereby assisting businesses to start trading again and recover from the lockdown period.

Details of the loan:

  • Loans will cover up to three months of operational costs and will be drawn down monthly.
  • Each business may accept only one COVID-19 SME loan from one bank under the loan guarantee scheme.
  • Interest will accumulate from the first drawdown, while repayments of capital and interest will only start after a six-month payment holiday.
  • The loan and interest will be fully repayable over 60 months thereafter.
  • The loan will be offered at a single, agreed lending rate by all banks participating in the scheme and that rate will track the prime rate. 

Qualifying criteria:

  • Business must have an annual turnover of less than R300 million (inclusive of the group).
  • Business is defined as any company, statutory body corporate, close corporation, a sole proprietorship, trust or partnership, association, joint venture or any similar entity, but excludes state owned entities, listed companies and companies with capital market funders or funding instruments.
  • Registered with the South African Revenue Services (SARS).
  • Business must have an existing relationship with either Mercantile Bank or Capitec Bank and must be in good standing as at 29 February 2020 (up to date on all credit agreements and have a good credit history).
  • Need to be able to demonstrate that the Declaration of a National Disaster has directly, or indirectly, resulted in a significant and adverse impact on the business’ ability to generate revenue.
  • The business has no existing capacity to borrow, where such existing capacity could still be used to alleviate the financial distress of the business.
  • Business may not apply for more than one COVID-19 SME Loan

Terms and Conditions:

The terms and conditions recorded herein are not exhaustive and should be read with the terms and conditions recorded in other documents regulating the COVID-19 SME Loan.

  • The COVID-19 SME Loan application will ONLY be considered upon full completion and provision of the required source documents.
  • The COVID-19 SME Loan Product is only available for loans to eligible clients which are businesses as defined in the South African Reserve Bank Guarantee Scheme.
  • Eligible clients will be businesses in groups which have an annual turnover of less than R300 million and meet all the additional eligibility criteria as defined in the South African Reserve Bank Guarantee Scheme.
  • Each COVID-19 SME Loan will be subject to Mercantile’s standard risk evaluation and credit application and granting process.
  • An eligible client may only conclude a COVID-19 SME Loan Agreement with one bank. In the event of a breach of this its undertaking the COVID-19 SME Loan made available under that COVID-19 SME Loan Agreement (together with all other amounts payable or to become payable thereunder) will immediately become repayable.
  • An eligible client may only have one COVID-19 SME Loan.
  • The COVID-19 SME Loans under each COVID-19 SME Loan Agreement will be made available for a period of three months.
  • The applicant, if successful, (“the Borrower”) authorises the Bank to disburse the loan in 3 equal amounts over three-month period.
  • COVID-19 SME Loans will accrue interest at the Prime Rate.
  • The Prime Rate will apply to the COVID-19 SME Loans from date of first draw down and will be calculated as a nominal annual compounded monthly rate.
  • The obligation to pay interest and capital on the COVID-19 SME Loan will be deferred for a period of six-months from date of first draw down.
  • From month seven after date of first draw down against the COVID-19 SME Loan, the outstanding capital and interest roll-up for the first six months will be amortised over a period of five years (sixty months).
  • The first payment will become due at the end of the seventh month from date of first draw down against the COVID-19 SME Loan.
  • The Borrower may settle the outstanding balance on their COVID-19 SME Loan, in part or in full, at any time prior to maturity of the COVID-19 SME Loan term without penalty.
  • In the event of liquidation or sequestration or similar proceedings of the Borrower, the COVID-19 SME Loan will be subordinated to other creditors, credit providers and senior claimants of the Borrower.
  • The Bank will be treated as a concurrent creditor in business rescue proceedings.
  • The COVID-19 SME Loans are intended for specific operational expenditure of the Borrowers business, and are subject to the “usage requirement” and the “restrictions”.

N.B Please ask your relationship manager for the full terms and conditions.

How to apply:

Please speak to your dedicated relationship manager at Mercantile Bank or Capitec Bank to request further assistance and to submit your application form.

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