SA business owners reluctant to incur more debt under current economic conditions - Basa

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Business owners are reluctant to incur more debt while uncertain business conditions and a weak economic outlook hampers their ability to generate sustainable income from which they can repay the loans, Basa said.

Johanannesburg - Business owners are reluctant to incur more debt while uncertain business conditions and a weak economic outlook hampers their ability to generate sustainable income from which they can repay the loans, the Banking Association of South Africa said on Sunday.

This assistance from banks significantly reduced demand for help from the Covid-19 loan guarantee scheme, which offered small businesses loans to cover their operating expenses like rent and salaries until"new normal" economic activity could resume. Banks extended R13.39 billion under the Covid-19 loan guarantee scheme, Basa said.

As at August 15, participating banks had received 40,292 applications – up by only 615 over two weeks - for loans from the guarantee scheme. Of all the applications, 24 percent had been approved by banks and taken-up by businesses, while 39 percent were in the process of being assessed. The SARB and Treasury had agreed with the commercial banks to guarantee R67 billion loans under this scheme. The SARB and Treasury had announced that the scheme could be extended to guarantee up to R200 billion. However, demand for Covid-19 loans was expected to peak soon due to the prevailing business and economic conditions.

 

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