Compensation of Loan Interest
What are the benefits?
Enterprises or entrepreneurs can recover part of the funds for the interest paid on the loan and allocate these funds to other business needs.
What companies are eligible?
Small and medium-sized business (SME) entity: a micro, small or medium-sized enterprise or an entrepreneur (a natural person engaged in economic and commercial activities).
List of documents required for interest compensation measure
- Grant Agreement
- “One Company’s” declaration (see video instruction for completion)
- Declaration of the small- or medium-sized enterprise status (see video instruction for completion)
- Loan agreement or its copy/copies
- Copy of amended loan agreement (if signed)
- Statement from the financial institution on the amendment of the applicant’s loan agreement (if signed)
- Current loan schedule signed by the financial institution
- Current loan schedule in .xls format
- Statement of the applicant’s current account certified by an employee of the financial institution (or an equivalent document of another form with the same content (e.g., a copy of the current account agreement)
- Power of attorney of the head of the company and/or entrepreneur granted to the authorised person, if the application is signed by a person other than the head
- Copy of business licence or self-employment certificate (to be submitted only if the applicant is a natural person)
- Investment project (business plan) (applies to real estate acquisitions cases)
- Extract from the real estate register or vehicle registration certificate (applies to real estate, passenger vehicles and goods acquisition cases)
- Copies of the project agreement or decision financed by the EU structural funds or state or municipal institutions of the Republic of Lithuania (applicable if the loan agreement funds are allocated to finance the project or part thereof supported by the EU structural funds or state authorities of the Republic of Lithuania)
What is the maximum amount?
- Compensation is provided for up to 95 % of the actually paid amount of interest, but no more than 7 % of annual interest.
- Where the compensation is for a loan taken out for an electric vehicle, the maximum compensated loan amount will be EUR 35,000 including VAT. Where the compensation is for a loan taken out for the purchase of a commercial vehicle (class N1), the maximum compensated loan amount will be EUR 25,000 including VAT.
- The maximum period for which interest may be compensated is 36 months.
- SMEs that have taken loans since 1 January 2020 and whose loan agreement is valid (not expired or terminated) at the time of the assessment of the application are eligible to apply. Alternatively, if a new financing for a new investment is provided under a loan agreement that was signed before 1 January 2020 (however, a change in the duration or amount of an existing loan is not considered to be the provision of new financing) and the amendment to the loan agreement for the provision of new financing is signed after 1 January 2020, such SMEs are also eligible.
- Compensation can be granted within the limits of EUR 200,000 as de minimis aid.
How does it work?
In order to benefit from this instrument, an application must be submitted to INVEGA through the electronic application system.
- The application is evaluated within 30 working days from the receipt of the duly submitted documents.
- After a positive decision, compensation of interest is paid out monthly.
- Upon the signing of the grant agreement, the borrower does not need to submit any additional documents to INVEGA. Compensation is calculated on the basis of the information received from a financial institution.
Information on adopted decisions can be found in the section Contract /Decisions in the electronic application system.
- The loan is granted under a loan agreement with a financial institution that has a valid agreement with INVEGA on cooperation in the implementation of interest compensation measures. This clause does not apply when the loan is granted under INVEGA’s financial instrument “Startuok”.
- No bankruptcy and/or restructuring proceedings have been initiated against the applicant, and if the applicant is a businessman, the bankruptcy proceedings of the natural person have not been initiated.
- The applicant is eligible to de minimis support under the Commission Regulation (EU) No. 1407/2013.
- No conviction regarding crimes of financial economic character has been adopted and entered into effect within the last 5 years with regard to the applicant, its owners who have at 25 percent of the shares and/or other interests marking participation in the company’s capital and/or votes, and/or managers.
- When interest is compensated to the applicant, the interest is and will not be financed from the State budget of the Republic of Lithuania and/or municipal budgets and other monetary sources at the disposal of the State and/or municipalities, structural funds of the European Union, other measures of financial support of the European Union, other international support funds, and if the State budget funds are attributed to cover the interest, it will not be paid more than once.
- The applicant and its beneficiary, or the natural and legal persons for whose benefit the loan will be used, are not subject to sanctions (any trade, economic or financial sanctions, embargoes or other restrictive measures).
- The agreement for investment loan or financial lease (leasing) entered into with the financial institution that has a valid cooperation agreement with INVEGA on compensation of interest at the time of the application’s consideration (list of financial institutions).
- Loan agreement is signed not earlier than 1 January 2020 and is valid at the time of application. Alternatively, a new financing for a new investment is provided under a loan agreement that was signed before 1 January 2020 (however, a change in the duration or amount of an existing loan is not considered to be the provision of new financing) and the amendment to the loan agreement for the provision of new financing is signed after 1 January 2020.
- Overdraft, factoring, letter of credit and bank guarantee are not considered a loan under this tool.
- If the loan consists of several parts of different purposes, the interest shall be compensated for the part of loan intended to finance the eligible expenses. In such a case, the parts of the loan have to be divided in such a way as to make it possible to identify the purpose of eligible part of the loan funds at the time of loan payment, as well as repayment schedule of that part and the applicable interest rates.
- When the loan is for the purchase and/or construction of real-estate property and/or for investment in the substantial improvement of a building/structure in order to sell or transfer it to others, including renting and leasing, and not to use it for own activities. Use of real estate for own activities means that at least 60% of the acquired property is intended to be used for the economic activities of the borrower. Also when the loan is for the purchase or construction of residential real estate and/or investment in the substantial improvement of a residential building/structure where the applicant is a business person or a legal person and his/her/its activities cannot be legally carried out in such residential premises.
- When the loan is for the purchase of non-commercial vehicles (M1 class). This clause does not apply to applicants whose actual business is car rental, also to the services of driving schools, passenger transportation, including taxi and ridesharing, or the acquisition of special purpose vehicles. Car rental business is deemed to be effectively carried out when such services are offered on the public market.
- When the loan is for the purchase of a used commercial vehicle (class N1) (with a mileage of 6000 km or more than 6 months in service), excluding special purpose vehicles.
- When the loan is used to purchase a new commercial vehicle whose value as per the sales agreement exceeds EUR 40,000 including VAT or EUR 60,000 including VAT in case of purchasing electric vehicles, except for special purpose vehicles.
- When the loan funds are used to finance financial assets or to pay dividends or bonuses.
- When the loan is taken for the purpose of granting a new loan to a third party, for the repayment of debt obligations (loans, overdrafts, factoring, letters of credit, bank guarantees) between third parties and the borrower, unless the loan is used for the refinancing of the borrower’s investments made not earlier than 6 months prior to the signing of the loan agreement.
- When under the loan agreement the loan funds are intended to replenish the working capital, unless the working capital is part of the loan, as set out in clause 3.6 of the Description.
- When under the loan agreement the loan funds are used to finance investments made outside the territory of the Republic of Lithuania.
- When INVEGA approved and concluded grant agreements for interest compensation under the description of the terms and conditions for financing projects under the joint instrument “Partial Compensation of Interest” of the Operational Programme for European Union Funds Investments in 2014-2020.
SME entities cannot be in the process of bankruptcy, restructuring or liquidation.
The loan is not intended for the following activities of the SME entity:
- Real estate operations;
- Road freight transport and the rental of freight vehicles, if the loans are for the purchase of freight transport vehicles;
- Crop and animal production, hunting and related service activities;
- Forestry and logging;
- Fishing and aquaculture;
- Manufacture and specialised retail trade of weapons and ammunition;
- Distillation, rectification and blending of spirits;
- Wholesale of alcoholic beverages;
- Manufacture and wholesale of tobacco products;
- Gambling and betting activities;
- Financial and insurance activities.