The scope of BDB guarantee program in support of individuals is expanded
The government’s decision increases the ceiling for interest-free loans and the deadline for applying
The Bulgarian Development Bank has prepared changes to the Program for guaranteeing interest-free loans to protect people deprived of the opportunity to work due to the COVID-19 pandemic.
The Decision of the Council of Ministers of December 10, 2020 increased the ceiling for interest-free loans guaranteed by BDB for one individual from 4 500 leva to 6 900 leva. The deadline for applying was extended until June 30, 2021 or until the expiry of the guarantee limits of the partnering commercial banks under the Program.
The change was required due to the continuing pandemic situation in the country.
The government has instructed Bulgarian Development Bank to unconditionally guarantee all loans granted by commercial banks in compliance with the new conditions. This also applies when the loan agreements or the additional agreements to them were signed before the update of the financial agreements between Bulgarian Development Bank and the commercial banks in accordance with the amendments to the Program.
The aim is help as soon as possible those who are again on forced unpaid leave and the self-employed with interrupted activity or a drop in income at the end of the year due to the second wave of the pandemic.
The adopted changes provide an opportunity to support more people, including those who were once on unpaid leave and were subsequently left without an employment contract and were directed to employment offices.
The maximum repayment period is 5 years, with a minimum of 6 months and a maximum of 24 months grace period. The loans are exempt from fees, commissions and penalties.
The Government Decision introduces changes for self-employed persons engaged in freelance or craft by registration and farmers, particularly affected by the pandemic. They should submit certified copies of the accounting documents, tax returns or other documents issued by them that establish a decrease in income for the respective period. A declaration according to a sample form of BDB is also required, stating that the data and documents provided are exhaustive with regard to the decrease in income. If these documents are not applicable, it is sufficient for the person to submit a declaration according to a sample form of BDB that he or she has suffered at least 20% decrease in income over the periods under review compared to those before the pandemic.
Changes are also introduced in the Framework Mechanism for granting and managing loans. Those who apply for a loan increase, including under the conditions of a second commercial bank, if the first one has exhausted its guarantee limit, should submit, in addition to the Loan Application form, only:
- a document from the employer for unpaid leave: for persons employed under an employment contract, who after their initial return to work are again on unpaid leave;
- a document – declaration submitted according to NRA’s form for a new interruption of activity: for self-employed persons.
In other cases, including when the loan is obtained due to a drop in income, already established circumstances will not be re-examined, and when applying exceptionally ton another commercial bank due to exhausted guarantee limit of the first one, the eligible person should provide a copy of the loan agreement under the Program.
BDB Program also provides more opportunities to include seasonal workers and young people who started working in 2020. It is sufficient for the person to have a total of 3 months of employment relationship in the period between January 1, 2020 and the date of his or her application for a loan. For this three-month period, it is necessary to have declared and/ or paid social security contributions by the employer, in case they were due.
For self-employed persons, it is necessary to have declared or paid the social security contributions due after January 1, 2020 inclusive, only for the period in which they have carried out activity.
The condition that the persons have not received other remuneration for work activity from another source, as well as that the person has at least 5 worked days in March, is dropped.
The restriction on funding will not also apply, if applicants for a loan under the Program have also benefited from another measure provided by the state for individuals in connection with the pandemic. The measure for interest-free financing can be combined with the allocation of 24 leva per day by the Ministry of Labor and Social Policy.
The Bulgarian Development Bank does not consider loan applications, but includes loans already approved by commercial banks in the issued portfolio guarantee.
Partners in the Program are 12 commercial banks, 10 of which continue to accept applications for interest-free loans. These are Allianz Bank Bulgaria, DSK Bank, Investbank, First Investment Bank, Commercial Bank D, UniCredit Bulbank, United Bulgarian Bank, Eurobank Bulgaria, Raiffeisenbank and Central Cooperative Bank.
Municipal Bank and International Asset Bank have exhausted the guarantee limit.
Additional agreements are expected to be signed with each of the partnering banks.
The program for interest-free loans for individuals affected by the emergency situation and the COVID-19 pandemic was launched as an anti-crisis measure in April 2020. So far, 23 538 people have taken advantage of it, for whom Bulgarian Development Band has confirmed guarantees for financing in the amount of over BGN 98,3 million.
At the end of November, the EC also approved changes to the business support guarantee program in order to make it available to a larger number of companies. With the new parameters, BDB guarantees the granting of loans up to BGN 1 million for small and medium-sized enterprises and up to BGN 2 million for big companies that are suffering negative consequences from the pandemic. The loans are granted by 8 partnering banks, with reduced requirements for collateral and a possibility for a grace period of up to 3 years.