MDB

COVID-19 GUARANTEE SCHEME (CGS)

 

Download Press Release

 

The MDB COVID-19 Guarantee Scheme (CGS) provides guarantees to commercial banks in order to enhance access to bank financing for the working capital requirements of businesses in Malta facing a sudden acute liquidity shortage as a result of the COVID-19 outbreak.

The CGS has been approved by the European Commission on 2 April 2020 under the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (European Commission Press Release).

CGS is part of the wider package of Government’s COVID-19 Response Support Programme.  

A Guarantee Fund of €350 million has been allocated by Government for the purpose of guaranteeing loans granted by commercial banks in Malta to meet new working capital requirements of businesses facing cashflow disruptions due to the effects of the COVID-19. 

The CGS enables the commercial banks to leverage Government’s guarantees up to a total portfolio volume of €777.8 million to support all types of businesses.

The CGS has been entrusted to the Malta Development Bank (MDB) which is responsible to develop, administer and implement the scheme. The CGS will be intermediated via commercial banks in Malta.  

Loans are available from the commercial banks accredited by the MDB. 

Loan applications are assessed by the commercial banks in line with their credit policy criteria. Final approval rests with the commercial banks. 

 

Information for Businesses

Loan Features

 

Maximum Individual Loan Amounts

  • Small and medium-sized enterprises (SMEs): €2 million
  • Large enterprises: €5 million
  • Amounts higher than €2 million but limited to a maximum of €10 million for SMEs; and amounts higher than €5 million but limited to a maximum of €25 million for large enterprises, require the prior ad-hoc approval of MDB.

Provided that such amounts do not exceed:

  • Double of the annual wage bill of the beneficiary; OR
  • 25% of total turnover of the beneficiary in 2019
  • a higher amount, subject to appropriate justification and self-certification, to cover the liquidity needs of SMEs for the coming 18 months and of large enterprises for the coming 12 months.

Interest Rate: To be determined by the commercial bank. Commercial Banks would need to give an interest rate reduction to beneficiaries of at least one percentage point on the average lending rate as compared to similar facilities prior to the introduction of the guarantee scheme.

Loan Term: Minimum 18 months to maximum of 48 months. The term can increase to 72 months, subject to additional terms and conditions.  Loan terms longer than 72 months will not be covered by the CGS..

Moratorium: Minimum period of 6 months with the possibility to extend to one year on a case-by-case basis. The moratorium applies to both interest and capital repayments. 

Eligible Costs included in Working Capital

The CGS covers new working capital loans. Eligible costs under these loans mainly include, 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 and other similar commitments and in respect of investment expenditures provided that investment expenditures only qualify under the Scheme 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
  • Bond coupons on listed securities

The CGS shall not cover restructuring or rescheduling of existing facilities. 

Eligible Beneficiaries

The CGS covers all business undertakings established and operating in Malta, being both SMEs and large enterprises.  The main factors determining whether an enterprise is an SME are the staff headcount, and, either turnover or balance sheet total.

SMEs are defined in the EU Recommendation 2003/361 as per the table below:

Company category

Staff headcount

     Turnover

       or

Balance sheet total

Medium-sized

< 250

≤ € 50 m

≤ € 43 m

Small

< 50

≤ € 10 m

≤ € 10 m

Micro

< 10

≤ € 2 m

≤ € 2 m

      

Guarantee Fee

For loans with an initial maturity of up to 4 years:

 

For 1st Year

For 2nd Year

For 3rd Year

For 4th Year

SMEs

0.15%

0.15%

0.15%

0.15%

Large Companies

0.25%

0.75%

0.75%

1.50%

 

For loans with an initial maturity of up to 5 or 6 years:

 

For 1st Year

For Years 2 & 3

For Years 4 to 6

SMEs

0.25%

0.50%

1%

Large Companies

0.50%

1%

2%