COVID-19 – Credit Support for the Serbian Private Sector
COVID-19 – Credit Support for the Serbian Private Sector
On 16 April 2020, Government of the Republic of Serbia enacted the following Regulations:
- Regulation on establishing a guarantee scheme as a support measure to the commercial sector in mitigating the impact of COVID-19 pandemic caused by SARS-CoV-2 virus, related to guarantees provided by the state to commercial banks for loans extended to private sector; and
- Regulation on establishment of Program of financial support to commercial entities for maintaining liquidity and operating capital during economic downturn caused by COVID-19 pandemic, related to favorable loans extended by the state to private sector.
1. Guarantees Issued to Commercial Banks to Secure Loans for Maintenance of Liquidity and Operating Capital
Republic of Serbia provides guarantees to commercial banks for obligations arising out of loans for maintenance of liquidity and operating capital extended to private sector if such loans meet certain requirements (hereinafter: “Qualified Loans”). Total amount of loans for which the Republic of Serbia may issue guarantees is limited to 2.000.000.000,00 EUR, while the guaranteed amount is limited to 24% of the total amount of Qualified Loans extended by a commercial bank. Detailed terms and conditions of guarantees will be regulated in agreements to be concluded between the Republic of Serbia, National Bank of Serbia and commercial banks participating in this guarantee scheme.
Who Can Obtain Financing?
Entities that are excluded from utilizing Qualified loans are the following:
- large corporations classified as such under the Act on Accounting;
- entities that were in financial troubles as of 31 December 2019 and in default as of 29 February 2020, as such terms are defined by the National Bank of Serbia rules and regulations;
- entities that have outstanding tax obligations in the Republic of Serbia;
- entities in which the Republic of Serbia, province or local municipality holds more than 50% of shares;
- entities who have been in payment default or under a reprogram pursuant to the classification of the National Bank of Serbia at any time during 12 months preceding 29 February 2020;
- companies that are subjected to consensual financial restructuring, any procedure under insolvency legislation or compulsory liquidation procedure;
- entities whose loans are already secured by the guarantee scheme.
Other Terms of Qualified Loans
In addition to requirements that relate to its user, a Qualified loan must satisfy the following conditions:
- maximum amount of the loan is lesser of the following two amounts: i) 25% of the borrower’s revenues in 2019, or ii) 3.000.000,00 EUR;
- the loan agreement is concluded by 31 December 2020 and the loan disbursed by 31 January 2021 at the latest;
- purpose of the loan is maintenance of liquidity and operating capital (refinancing is not allowed);
- tenure of the loan is no longer than 36 months from the disbursement, including a nine to twelve-month grace period;
- the loan is approved in RSD or EUR;
- loan is be repaid in monthly annuities;
- interest rate is set no higher than 1M BELIBOR increased by 2.5% for loans denominated in RSD and no higher than 3M EURIBOR increased by 3.0% for loans denominated in EUR;
- the borrower and majority owner (direct owner of 25% or more shares) have each provided at least one bill of exchange as collateral;
- the borrower is obliged not to pay dividends nor repay shareholders’ loans in a first year from disbursement of the loan;
- the borrower is obliged not to repay existing loans from another bank with the same purpose, unless included in the insured portfolio, during the grace period.
2. Loans Extended by the Development Fund of the Republic of Serbia
In order to finance the Program for the financial support to commercial entities in form of favorable loans, the funds in the amount of 24.000.000.000,00 RSD from the state budget and additional funds in the amount of 2.000.000.000,00 RSD from the Fund for Development of Republic of Serbia have been procured. These funds will be disbursed through the Fund for Development to which interested parties may submit requests for loan approval until all available funds are exhausted, or until 10 December 2020 at the latest. Decisions on loan approval shall be rendered by the Fund unit 31 December 2020. Criteria and terms for loan approval will be regulated in more detail in a bylaw to be enacted by the Fund for Development.
Entities that May Apply
Funds from this Program may be allocated to entrepreneurs, cooperatives, micro, small and medium-sized companies that are privately owned and that conduct production, service, trading and agricultural activities. Funds may not be used for: a) organizing betting and gambling games, lottery or similar activities; b) selling or buying oil or petroleum products; and c) production and selling or buying of any product or activity forbidden by state legislation or international conventions and treaties.
With the request for loan approval, interested parties must submit official financial reports for previous two years. The loan may be approved even if the financial reports show net loss in one of the two previous years, on condition that operating profit has been achieved in that same period.
Entities may submit a request for loan approval if the following conditions are met:
- they have not experienced difficulties i.e. no bankruptcy proceeding has been initiated against them, no pre-package reorganization plan proceeding has been initiated or measures from pre-package reorganization plan are in effect (UPPR), no financial restructuring or liquidation procedure has been initiated;
- headcount of full-time employees has not been decreased more than 10% in a period from 15 March until three-month period from loan disbursement, excluding part-time employees engaged before 15 March 2020 whose engagement period is expiring in this time frame.
Additionally, commercial entities that opt to participate in the Program may not pay dividends until the end of 2020 (payments may be executed in shares).
Terms of the Loan
The loan for maintaining liquidity and acquiring operating capital will be approved under the following conditions:
- maximum amount per borrower with its affiliates:
– for entrepreneurs and micro-sized companies up to 10.000.000,00 RSD;
– for small-sized companies up to 40.000.000,00 RSD; and
– for medium-sized companies up to 120.000.000,00 RSD;
- minimal amount for companies per borrower with its affiliates is 1.000.000,00 RSD and for entrepreneurs, cooperates and other registered entities 200.000,00 RSD;
- repayment deadline of the loan no longer than 36 months including 12-month grace period, aggregate tenure of the loan up to 24 months with 12-month grace period;
- annual interest rate is 1%;
- loans are approved and repaid in RSD;
- repayment in monthly annuities;
- interest rate is accrued and assigned to the principal amount of loan during grace period.
Depending on the value of the loan, borrowers are obliged to provide the following collaterals:
- for the amount up to 1.000.000,00 RSD, bills of exchange of the borrower and personal bills of exchange of the founders (all founders);
- for the amount up to 2.000.000,00 RSD, bills of exchange of the borrower, personal bills of exchange of the founders (all founders) and the warranty of a full-time employee;
- for the amount up to 10.000.000,00 RSD, bills of exchange of the borrower, personal bills of exchange of the founders (all founders) and warranty of the affiliated company;
- for the amount up to 25.000.000,00 RSD, bills of exchange of the borrower, personal bills of exchange of the founders (all founders) and the warranty of a solvent company that is not affiliated with the borrower;
- for the amount over 25.000.000,00 RSD, bills of exchange of the borrower, pledge on movable assets of the borrower or the pledgor and/or the first rank mortgage.
The founders of the borrower that are foreign citizens or companies registered abroad are exempt from providing bills of exchange as collaterals.
This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.
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