ECONOMIC MEASURES – GUARANTEE SCHEME
On April 16th 2020 the Government of the Republic of Serbia adopted the Regulation on establishing the guarantee scheme as an economic measure for reduction of the consequences caused by COVID-19, virus SARS-CoV-2 („Official Gazette RS“ no 57/2020) (hereinafter: the Regulation)
The Regulation establishes the legal framework, in accordance with which Republic of Serbia is a guarantee for the timely settlement of the obligations from the liquidity and working assets corporate loans, in order to reduce the negative effects of the COVID-19 pandemic on the economy.
I Who can be entitled with the loan secured with guarantee of the Republic of Serbia?
Micro, small and medium business entities can be entitled with this loan, with registered seat on the territory of the Republic of Serbia (including registered farmers), to whom the new loan is granted or renewed the existing loan, which fulfils the conditions prescribed with the Regulation.
The users of the loan cannot be persons who, up to date of February 29th, were facing financial difficulties, i.e. business entities in the restructuring, bankruptcy or compulsory liquidation procedure. Business entities with unsettled tax obligations, as well as large business entities cannot be entitled with this loan as well. The Regulation prescribes that one user can only be entitled with one loan in accordance with guarantee scheme, and these funds cannot be used for refinancing or prematurely settlement of the unmatured instalments of the existing loans.
II What are the conditions for the guarantee?
Republika Srbija će u skladu sa uredbom garantovati samo za kredite za finansiranje likvidnosti i obrtnih sredstava In accordance with the Regulation, Republic of Serbia will provide guarantees only for loans for liquidity and working assets funds, in the amount not bigger than one quarter, i.e. 25% of the revenue of the user in 2019, which amount cannot overcome the amount of EUR 3.000.000. The loan can be approved in RSD or EUR, with favorable interest rates, limited to one-month rate BELIBOR increased for 2,5% for loans approved in RSD, and three-month rate EURIBOR increased for 3% for loans approved in EUR.
Beside the fact that the state will guarantee for timely settlement of obligations, the user and the majority shareholder of the user (direct ownership of 25% or more) must submit the bills of exchange to the bank, as the additional security instrument on the loan.
Loan agreements must be concluded not later than December 31st 2020, and loans released not later than January 31st 2021. The Regulation prescribes that the loan repayment period cannot be longer than 36 months, with 9 to 12 months grace period included, form the day of releasing the loan.
III How are the measures implemented?
Republic of Serbia, National Bank of Serbia and commercial banks will conclude Initial agreements Pojedinačne ugovore on the guarantee of the Republic of Serbia. The Agreement will precise the conditions for security of the loan, the approval and stipulation of loans, mechanisms for increasing or decreasing the secured portfolios, the deadline for issuing of the guarantee in favor of banks, as well as other relevant questions. By concluding the agreement, it will be considered that the Republic of Serbia has issued the individual guarantee, while the final amount of each Individual guarantee will be stipulated with the annex of the agreement.
Republic of Serbia, in accordance with the Regulation, can guarantee for the loans for liquidity and working assets:
1) for new loans, in the amount not lower than 50% of the total amount of the loan on which the guarantee scheme refers to;
2) for renewal of the loans which mature after February 29th 2020, but not later from December 31st 2020, in the amount not bigger than 50% of the total amount of the loan on which the guarantee scheme refers to.
It remains to be seen how the loan approval procedure will be implemented in accordance with the Regulation, having in mind the fact that the Regulation provides only a legal framework for the implementation of measures, which will be specified by the conclusion of Individual Agreements. Individual agreements will precise the conditions for security of the loan, the approval and stipulation of loans, mechanisms for increasing or decreasing of the secured portfolios, the deadline for issuing of the guarantee in favor of banks, as well as other relevant questions.
For all further questions, you may contact your commercial banks, who will provide you with precise information for using the loans in accordance with the Regulation.