Last week we learned that despite it appearing as if a R1 billion pledge from the Rupert family was a donation, it was actually a loan.
However, there is some good news regarding this relief programme – dubbed the Sukuma Relief Programme – for sole proprietors.
Qualifying sole proprietors will receive a R25 000 grant which is not repayable.
In order to qualify, a sole proprietor will have to provide evidence of financial activity prior to the COVID-19 outbreak and they must be tax and regulatory compliant.
Sole proprietors can apply for the grant over on the Business Partners website. Business Partners will be handling the logistics of the R1 billion the Rupert family has made available.
But what about close corporations, companies and trusts?
Well according to Business Partners, these businesses will also receive a non-payable grant amounting to R25 000 but this will only be accessible when granted an unsecured loan.
Loans will range from R250 000 to R1 million with no repayment obligations or interest incurred for the first 12 months.
However, and this is rather important, the loan will be repayable from month 13 and interest will accrue at the prime rate from that same month.
It’s also important to note that the loan will be disbursed over a three-month period, “subject to you submitting documents monthly which support your continued need for financial aid,” according to Business Partners.
Naturally businesses will need to qualify for the loan. Aside from being formally registered and being both tax and regulatory compliant, managing director at Business Partners, Ben Bierman says businesses will need to prove they have been adversely affected by COVID-19.
“When applying, these entities will therefore be required to submit documents and supporting evidence to corroborate that it is a viable business that was impacted by COVID-19. This proof can be a demonstration of a decrease in turnover, erosion of working capital, or inability to pay salaries,” says Bierman.
However, we had a rather pertinent question for Business Partners – why charge interest at the prime rate rather than the much lower repo rate?
As it stands at time of writing, the prime lending rate sits at 8.75 percent, while the repo rate sits at 5.25 percent, according to the South African Reserve Bank. While it might not seem like much of a difference, when we’re talking about millions of rands, 3.5 percent is nothing to scoff at.
Indeed, Business Partners stated in a release sent to us late last week Friday that, “Business Partners will not be profiting from the funding in any way, and no fees will be charged in relation to the Sukuma Relief Programme”.
Why then is the loan carrying an interest rate of prime?
Granted, it appears as if it’s solely prime and not an additional percentage, but some clarity on this matter would be welcome.
We’ve contacted Business Partners to clarify this matter, but as of time of publication, the company has not responded.
We recognise that the prime lending rate is usually for those who have a great credit history and employing this for all lenders taking part in the Sukuma Relief Programme is likely a good omen but we really want to know why prime was the rate decided upon.
For now, business owners should visit the Business Partners website to find out more about its relief programme.
[Image – CC 0 Pixabay]