On the 3rd of April 2020 a scheme providing guarantees to commercial banks has been launched by the MDB to enhance access to bank financing to businesses facing liquidity issues due to the Covid-19 outbreak. The CGS has been approved by the European Commission and forms part of a wider package of the Government`s Response Support Programme in relation to Covid-19.
The amount of EUR 350 million has been allocated as a Guarantee Fund by the Government of Malta for the purpose of guaranteeing loans granted by Maltese commercial banks to meet new working capital requirements of businesses struggling to meet their cash flow requirements. The CGS will enable the commercial banks to leverage Government’s guarantees up to EUR 777.8 million to support all types of businesses.
Loans will be available from the commercial banks accredited by the MDB and subsequently assessed by the same commercial banks in line with their credit policy criteria. A list of accredited banks will be announced shortly. Final approval of these loans remain at the discretion of the said commercial banks.
SMEs employing up to 250 employees will be eligible for loans of up to EUR 2 million while large enterprises employing more than 250 employees, will be eligible for loans of up to EUR 5 million. Applications for loans which are higher than these amounts (up to a maximum of Eur 4 million for SMEs and Eur 8 million for large enterprises) will require prior approval by the MDB. The loan amounts cannot exceed double the annual wage bill of the beneficiary or 25% of total turnover in 2019 or a higher amount which will be subject to the appropriate justification and self-certification to cover the liquidity needs of SMEs for the next 18 months and of large enterprises for the next 12 months.
The applicable interest rate shall be determined by the commercial bank but this shall be of at least 1% less than the average lending rate compared to similar facilities available prior to the introduction of the CGS. The duration of the loans shall be of a minimum term of 18 months up to a maximum of 48 months. Loans of up to 72 months may be approved subject to additional terms and conditions, but loan terms longer than 72 months will not be covered by the CGS.
A moratorium period of a minimum period of 6 months shall be granted by the banks which can be extended to up to 1 year on a case by case basis. The moratorium period shall cover both the capital and interest repayments.
Interested businesses shall contact one of the accredited banks to enquire on their eligibility.
Eligible costs under this scheme cover the below costs but are not limited to:
- Salaries of employees, including social and health security payments
- Lease of establishment, including rental costs, energy and water bills, fuel etc.
- Unpaid invoices due to a decrease in business revenues in respect of working capital including similar commitments and investment expenditures only if they were contracted for prior to the approval of this Scheme by the Commission
- Acquisition of material and stock for continuation of business
- Expenses directly related to contracts which were cancelled or postponed because of the COVID-19 outbreak excluding penalties and other liabilities incurred due to non-performance of contracts
- Maintenance costs
The CGS shall not cover restructuring or rescheduling costs of existing facilities.
