EC has approved the changes to the guarantee programme to support the business having suffered by the COVID-19 pandemic
The changes will take effect at the 8 partnering banks that grant the loans under the programme
The European Commission has approved the changes to the guarantee programme to support the business having suffered by the COVID-19 pandemic. The changes were adopted by Decision of the Council of Ministers of 28 October 2020 and they will extend the scope of the government measure. The changes will take effect after the signing of additional agreements with each of the partnering commercial banks under the programme.
The approved changes provide an increasing number of companies from the sectors most affected by the pandemic with an opportunity to benefit from the programme. An opportunity to apply is provided to big companies (businesses with staff of more than 250 persons as well as with annual turnover of more than BGN 97.5 million or with value of assets of more than BGN 84 million) but only if they are business companies within the meaning of the Commerce Act. Thus, access to liquid resources will also be granted to bigger enterprises, including ones in the field of tourism and transport which were unable to benefit from the government measure so far. It will also support the bigger domestic producers whose business provides employment for entire regions of the country. Among the key improvements to the mechanism for granting financial resources for investments and not only for working capital. Financing small and medium-sized enterprises remains a priority of the programme as the minimum quota will be at least 60% of the formed credit portfolios.
The amount of the loans guaranteed by BDB has been increased as it can now reach up to BGN 1 million for SME and up to BGN 2 million for big companies. The deadline for applying under the measure has also been extended: the companies can submit requests to the commercial banks until 20 June 2021. The guarantee provided by BDB under the credit portfolios will also be extended by one year: from 5 to 6 years.
In order to apply for a loan it suffices that the companies meet one of the following conditions:
● a decrease in the turnover after the first quarter of 2020 compared to the same period of 2019 (on the basis of company’s financial statements); or
● receivables from customers that have not been received or amounts due but not paid to suppliers after 1 March 2020 (on the basis of company’s financial statements); or
● discontinued supplies from export which are necessary for the business of the company after 1 January 2020 or cancelled contracts for export (on the basis of certificates and documents submitted by the company); or
● sick leaves and self-isolation of the employees, an overall reduction in the number of employees, closed-down manufacturing facilities, premises and offices (on the basis of certificates and documents submitted by the company); or
● other circumstances demonstrating the company’s difficult situation due to COVID-19, as per a methodology adopted by the commercial banks which must be submitted to Bulgarian Development Bank AD .
Under the anti-crisis programme supporting the business BDB guarantees 80% of the amount of loans granted by the commercial banks as the percentage will be preserved even after the approved changes. In order to increase their readiness to lend, however, as well as to be able to reduce the amount of the interests under the loans the partnering banks have the right to demand security interests in rem from the businesses to the amount of up to 50% of the value of the loans they agree on.
At the same time the banks also have the right to provide unsecured financing. In order to ensure a more effective capital relief and credit protection for the credit institutions as per the approved changes the upper limit of payments under the guarantee is increased up to 50% of the guaranteed portfolio.
The programme for portfolio guarantees supporting the liquidity of SMEs having suffered from the state of emergency and the COVID-19 pandemic started as an anti-crisis measure in May 2020. So far, eight commercial banks have been partners under it by lending loans of up to BGN 300 thousand to companies having experiencing a decrease in turnover, staff layoffs, closedown of manufacturing premises and offices, outstanding receivables from customers and unsettled amounts with suppliers. These are: Bulgarian-American Credit Bank, Investbank, Post Bank, UniCredit Bulbank, DSK Bank, First Investment Bank, D Commerce Bank, and Allianz Bank.
So far, 940 companies have benefited from the programme as BDB has confirmed for them guarantees on financing to the amount in excess of BGN 129 million. The enterprises are in some of the sectors that have suffered the hardest from the pandemic: commerce, tourism, manufacturing, and transport.