The Bounce Back Support Scheme has come into effect to provide additional funding to qualifying businesses to grow the South African economy and facilitate job creation, the National Treasury says.

The scheme is expected to facilitate the recovery of businesses beyond the Covid-19 pandemic lockdowns. It will also help businesses recovering from the July 2021 civil unrest in KwaZulu-Natal and Gauteng, as well as the current ongoing flood-related disaster in KwaZulu-Natal.

The initiative comprises two mechanisms. The first is a loan guarantee that facilitates loans guaranteed by government to eligible businesses, which will assume a 20.5% portion of initial losses, with finance providers assuming the risk for remaining losses.

"The Bounce Back Support Scheme will also support economic growth and foster job creation in South Africa. Funds borrowed from this scheme, through participating banks, development finance institutions (DFIs) and non-bank small and medium-sized enterprise (SME) finance providers, can be used for growth and expansion and to foster job creation within South Africa," Treasury explains.

"The scheme benefits from lessons learned from the 2020 Loan Guarantee Scheme to provide for greater take-up including by DFIs and non-bank SME finance providers, which will participate on the same basis as participating banks," it adds.

The scheme comprises a loan guarantee mechanism of R15-billion, as well as a smaller R5-billion equity-linked scheme to be facilitated by Treasury and DFIs, which will be introduced later this year as a complementary tool.

The Bounce Back Support Scheme loans will be accessible through participating banks, which are banks that have opted to use the scheme for their customers.

Access for DFIs and non-bank SME finance providers to the Bounce Back Support Scheme will be facilitated through participating banks, and such participating banks will still have to perform due diligence in accordance with regulatory standards.

"Access to the equity-linked tool is expected to be introduced later this year and more details will be communicated once they are finalised," Treasury says.

Businesses with a maximum turnover of R100-million a year will be eligible to access the scheme. The maximum loan amount will be set at R10-million per businesses, and a minimum loan amount of R10 000 while, for non-bank lenders, loans may be made for a maximum amount of R100-million per non-bank lender, subject to the approval of the lender.

"Eligible businesses should contact their primary or main banker for further information on the scheme and the qualifying criteria," Treasury advises.

Bounce Back Support Scheme loans are to be granted at a preferential capped rate of repo plus 6.5%.

"Businesses will be required to repay the loan over a period of up to five years after any deferred interest period agreed to by the lenders.

"Loans can have rescheduling options at the discretion of the lenders, such as pay as you grow, for up to a period of ten years from the first drawdown in the event of businesses being initially unable to pay any repayment due," Treasury points out.