A recent article by Business Tech reports that the South African government will be offering some financial aid to small businesses that have been affected by Covid. This was announced in their statement on Monday 14th of March. The Covid loan scheme will come into effect on April 3rd, allowing small businesses to apply for ‘bounce-back’ loans from banks and other lenders. 

How will this scheme work you may ask? According to finance minister Enoch Godongwana’s February Budget speech, the initiative will use two mechanisms that will be introduced consecutively. 

Mechanism 1: 

Participating banks and development finance institutions will assist R15 billion in small business loan guarantees, according to Godongwana. “This gives qualified non-bank small and medium lending providers access.” Banks and other qualifying small and medium credit providers will be partnered with the government, with the government subsidizing the first 20% of losses. He continues to say: “The eligibility criteria, including the requirement for collateral, has been loosened. This mechanism will be launched and operational next month.” 

Mechanism 2: 

The government plans to implement a business equity-linked loan guarantee support system by April of this year. 

 “Through the bounce-back system, we hope to bring the overall support package to R20 billion.” This scheme’s equity support mechanism will be enabled by DFIs (development finance institutions). It will also be offered to non-bank small and medium loan providers who meet certain criteria, according to Godongwana. 

How to put the Covid loan scheme to good use 

With money available to get your business back on track, it is important to make sure it is used wisely. Below we will look at ways to make sure you make the best of your loan: 

Boost marketing 

The most effective way to grow your business is to sell more.  A well-targeted marketing effort can increase sales, as any business owner knows. Traditional marketing tactics, as well as digital marketing, demand a financial investment. By creating additional sales volumes, using your loan for this purpose can pay for itself several times over. Invest in a striking website and social media pages for your business. 

Upgrade your technology

A minor investment in business technology systems can have a big impact on your company’s growth. If you don’t already have one, invest in a good point of sale (POS) and customer relationship management (CRM) system. You might be surprised by the insights and benefits you obtain from using these tools. 

Set up/improve the website for your business

As mentioned earlier, your company website is very important. If your business does not yet have a website, now is the time to get one.  Small businesses that have an internet presence are seen as more trustworthy than those that don’t show up in a Google search. Spending money on digital marketing and cleaning up your website usually generates a disproportionately high return on investment. 

A final thought on the Covid loan scheme

According to a Budget Review paper accompanying the speech, the government will invest R721 billion over the next three years to encourage quicker and more inclusive economic growth in order to solve the country’s unemployment, poverty, and inequality. If your business qualifies for this loan scheme, don’t sleep on the opportunity.