The National Empowerment Fund (NEF) and the Department of Trade, Industry and Competition have launched an to help black-owned businesses recover from the Covid-19 induced financial crunch.
The institution said the new fund, announced on Saturday will offer concessionary business loans as well as equity funding with a maximum interest rate of 2.5%.
Eligible businesses will be able to access between R250 000 and R10 million in funding. But they must provide proof of commercial viability and must demonstrate that the need for economic relief is a direct result of distress caused by Covid-19, said the NEF general counsel Mzi Dayimani in a statement on Saturday.
To qualify for funding under the Economic Distress Fund, the NEF said applicants must meet the following criteria:
- The business must have been operating for at least 3 years by the time they apply to the NEF.
- It must have proper historical financial records demonstrating a track-record of honouring debt obligations, except during the period since the Covid-19 pandemic began.
- The business must have at least 10 employees.
- The applicants must demonstrate that the business is unlikely to pay all its debts due in the next six months without external financial support.
- They must show that the business is unable to fund its operating activities in the next six months.
- They are also required to prove that getting financial support will give their businesses a fair chance of recovery and job retention.
The NEF CEO, Philisiwe Mthethwa said the organisation has dedicated teams including chartered accountants, engineers, corporate lawyers, and various other experts who will help in the implementation of the Economic Distress Fund.
Mthethwa said while the pandemic has devastated and placed the livelihoods of many businesses at stake, black businesses have been dealt a particularly heavy blow because they have historically struggled to access affordable capital.
"That is why the Economic Distress Fund will support black companies in accordance with the legislated mandate of the NEF," she said.