Businesses, applying to a credit institution for a business loan, may often encounter a problem of unattractive or insuffiecient security deposit. INVEGA may guarantee the repayment of losses arising from the investments made by financial institution in SMEs for Loans and Leasing transactions as well as financial credits granted for large companies up to 80 percent by offering individual and portfolio guarantees:
Individual guarantees – provided by INVEGA with an intensity of 30-80 percent, offer solutions to unattractive or insufficient conditions and facilitate the access to the funding sources.
Portfolio guarantees – secures the repayment of 80% of the principal amount of loan/leasing to a financial institution. With Portfolio guarantees financial institutions require a smaller down payment and apply a lower interest rate as compared to market conditions.
In order to use this financial instrument and obtain a guarantee, SMEs have to apply with a bank or any other credit institution (e.g., a credit union), which agrees to credit its business project and negotiates on loan conditions (amount of principal, currency, maturity, repayment schedule, interest rate, etc.). A bank, taking a decision to grant a credit, assesses the adequacy of security provided for a loan. If the security is insufficient, the bank can:
1. apply with INVEGA for issuing a guarantee and submit required documents;
2. include the credit in the portfolio of the financial institution.
INVEGA issues guarantees for loans aimed at:
- tangible investments – purchase, construction, repairs or reconstruction of fixed assets;
- intangible investments – technology takeover acquiring patents, licenses or other technical know-how not subject to patenting;
- working capital;
- refinancing of investments from enterprise funds (no earlier than within last 3 months before the date of receipt and registration of the guarantee application). In such case the guarantee application must be accompanied by documents supporting expenses and payment.
INVEGA does not guarantee loans granted for projects related with manufacturing of agricultural products, forest, fishery and aquaculture, production, primary processing. The list of products growing, production, primary processing of which is not eligible to INVEGA guarantees is annexed to the EU Treaty.
INVEGA does not guarantee loans granted for projects of cargo transportation enterprises in aimed at the acquisition of cargo transportation vehicles.
INVEGA does not guarantee loans the funds of which can also be used for personal (non-business) purposes.
If a business entity is operating for 3 years and longer, maximum guarantee amount may be 1 448 100 Euros. If several guarantees are obtained, their balance may not exceed 1 448 100 Euros. Guarantee may account for 30-80% of loan amount.
If a business entity is operating for less than 3 years, maximum guarantee amount is 579 240 Euros, and when several guarantees are obtained, their balance may not exceed 579 240 Euros.
To secure repayment of a loan guaranteed by INVEGA, a borrower must mortgage tangible fixed assets of the enterprise purchased, constructed, repaired or reconstructed for loan funds.
It shall not be required to mortgage assets purchased for loan funds if other more liquid assets at least corresponding to the value of assets purchased for loan funds are provided for mortgage purposes and this mortgage is sufficient to minimize the risk of project implementation.
In case of investment loan
When assets purchased, constructed, repaired or reconstructed for loan funds are mortgaged to the bank, participation of enterprises accounting for minimum 20% of the project value (for enterprises operating for up to 12 months – at least 10%) may qualify:
- when own funds of the enterprise are/have been invested in the investment part of the project,
- mortgaging to the bank tangible fixed assets possessed by the enterprise or personal property of enterprise shareholder or owner or other assets.
The value of mortgaged assets shall be calculated on the basis of its liquidation/ involuntary sale and must account for at least 20% of payments required to be financed with enterprise funds (for enterprises operating for up to 12 months – at least 10%).
An enterprise must participate in the project with its own funds or assets until it begins using the loan or proportionately concurrently with the use of loan funds.
An enterprise acquiring assets for guaranteed loan funds and mortgaging such assets shall not be considered as participating in project financing.
Loan for working capital
Participation may qualify in the following cases:
mortgaging to the bank tangible fixed assets of the enterprise accounting for minimum 20% of financed project value (for enterprises operating for up to 12 months – at least 10%) (mortgaged assets shall be valued at liquidation/involuntary sales value);
when the enterprise does not have sufficient assets acceptable to the bank or is not able to mortgage assets to the bank due to valid reasons, measured enterprise equity-to-asset ratio may not be less than 20% (for enterprises operating for up to 12 months – at least 10%). This ratio shall be calculated on the basis of taken loan.
A borrower is charged a one-time guarantee fee for the issued guarantee. The amount of guarantee fee depends upon enterprise’s age. Guarantee amount established for enterprises operating for up to 3 years accounts for 4% of the guarantee amount, and for enterprises operating for 3 years and longer – 3% of the guarantee amount.
At present the state promotes and supports enterprises which take loans with INVEGA guarantee paying part of the guarantee fee for the enterprise.
Guarantee fee is financed for up to 579 240 Euros of the guarantee amount. 579 240 Euros excess of the guarantee amount is not financed and SME will have to pay a full price.
The rate of financing depends upon enterprise age and its SME status. For borrowers, SME entities 3/4, 2/3 or 1/2 the INVEGA guarantee fee:
new enterprises (operating for less than 3 years) are financed 3/4 of the guarantee fee (a borrower pays 1%).
very small (micro) and small enterprises operating for 3 years and more are financed 2/3 of the guarantee fee (a borrower pays 1%).
medium-sized enterprises operating for 3 years and more and employing less than 250 employees are financed 1/2 of the guarantee fee (a borrower pays 1.5%).
Consequently, enterprises pay a fee of 1 or 1.5% of the guarantee amount to INVEGA for guarantees issued by it.
If a SME has obtained several guarantees, their balances are summed up. Guarantee fee is financed when the amount of guarantee balances does not exceed 579 240 Euros.
The age of a SME is calculated fro the date of receipt of application for the issuance of guarantee and its registration with INVEGA.
INVEGA guarantee, partial financing of the guarantee fee and interest are immaterial forms of state aid to business provided according to under de minimis rule, i.e. aid granted during 3 years may not exceed 200 000 Euros.
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