The Serbian Government has adopted the new regulation for the state guarantee scheme as the collateral for the loans of local banks to companies in Serbia as part of the economic measures aimed to minimise the negative impacts of the spread of Covid-19 to Serbian economy ( the “Guarantee Scheme”).
On 16 April 2020, the Government adopted the Regulation on Establishment of Guarantee Scheme as Supportive Measure to Businesses to Mitigate Negative Impacts of Pandemic of disease COVID-19 caused by virus Sars-CoV-2(the “Guarantee Scheme”).
The Republic of Serbia shall provide a state guarantee to local banks as the collateral for the loans granted to companies with the purpose of financing the liquidity and working capital. The guarantee agreement shall be executed between the Republic of Serbia, the National Bank of Serbia, and the local banks. The state guarantee is unconditional and payable on first demand. The total amount of the state guarantee is EUR 480,000,000.
An individual state guarantee will be issued in favour of a local bank. Banks are entitled to grant the total amount of up to EUR 2,000,000,000 of loans to businesses for the purposes and under the terms set out in the Guarantee Scheme.
The Guarantee Scheme contains the eligibility criteria for granting of the loans to be secured by the state guarantee. A borrower of the loan secured by the state guarantee could be a local entrepreneur, farmer, or SME, to whom a bank has approved the loan pursuant to the credit policy of the bank and the Guarantee Scheme. Loans secured by state guarantee may be approved only for the purpose of financing the liquidity and the working capital of the borrowers and such loans may not be used for refinancing and prepayment of undue installments of the outstanding loans.
Loans secured by state guarantee may not be approved to large businesses, businesses with financial difficulties, due and unpaid taxes, businesses where the Republic of Serbia, autonomous province or local municipality has the ownership interest over 50%, businesses under restructuring or in loan-non-performing status before 29 February 2020.
Loans secured by the state guarantee may be granted under the following terms:
- a loan is disbursed by 31 January 2021;
- repayment term up to 36 months, including grace period from 9 to 12 months;
- loan granted in RSD or EUR;
- repayment in monthly installments;
- interest rate up to 1M BELIBOR + 2.5% for RSD loans;
- interest rate up to 3M EURIBOR + 3% for EUR loans;
- promissory notes of the borrower and the shareholder, having the ownership interest in excess of 25%;
- no dividends payments, or repayment of shareholder loans within the first year as of the date of the loan agreement;
- no prepayment of other loans with the same purpose during the grace period;
- the loan agreement must be executed by 31 December 2020.
Allocation of the Guarantee Scheme value between the banks shall be performed on the current loan market share for SMEs on 29 February 2020 for 50% of the Guarantee Scheme amount to which the guarantee scheme is applied. The remaining 50% allocation shall be allocated based on the applications of the banks which have utilised 90% of the allocated funds.
The National Bank of Serbia and the Ministry of Finance are in charge of the Guarantee Scheme implementation.
By Stefan Jovicic, Senior Associate, and Nikola Poznanovic, Partner, JPM Jankovic Popovic Mitic