CALL FOR EXPRESSION OF INTEREST BY
CREDIT INSTITUTIONS
Scheme Overview
The GCLS is a risk-sharing facility involving co-lending of
up to €100 million between the MDB and the accredited credit institutions on a
50:50 basis. The MDB provides an
interest rate reduction on the part of the loan granted by the MDB and a
guarantee of 60% on the credit institution’s part of the lending.
The GCLS offers favourable financing terms for bankable
projects with a special focus on SMEs particularly those involving
innovation, digitalisation and, more broadly, the preservation and enhancement
of competitiveness; socially-oriented initiatives, particularly those involving
knowledge generation, education, health and social inclusion; investment that
addresses environmental issues such as water usage, water treatment, waste
treatment, reduction and reuse; and investment aimed at achieving a high level of sustainability or to promote
the circular economy.
The GCLS caters for SMEs with large loan requirements that
exceed the maximum of €750,000 under the SME Guarantee Scheme (SGS).
The part of the loan
provided by the MDB is backed by a
guarantee from the European Investment Fund (EIF) under the Pan-European
Guarantee Fund (EGF) programme.
The incentive guidelines of this facility are available here.
Information for SMEs
The purpose of the financing under GCLS covers:
- the establishment of new enterprises,
- expansion capital,
- capital for the strengthening and/or stabilisation of the general activities of an enterprise,
- the realisation of new projects, penetration of new markets or new developments by existing enterprises.
The Scheme is open to all SMEs in all economic sectors. In order to be eligible, SMEs must:
- have a viable business proposal;
- show evidence that they are able to repay the facility;
- run a commercial activity in the non-excluded activities sector.
In view of the credit enhancement and substantially reduced credit risk
exposure provided by the MDB's uncapped guarantee of 60% on each facility
provided by the partner bank, the credit institution is expected to pass on the
benefit of the guarantee to the largest extent possible to the final
beneficiaries including in the form of lower interest rates, longer loan term, enhanced
access to increased finance and lower collateral requirements. In addition, the MDB’s part of
the loan shall have a lower interest rate than that of the credit institution
in order to enhance further the attractiveness of the package.
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Terms &
Conditions
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Product Name
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Guaranteed Co-Lending
Scheme for SMEs (GCLS)
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Objective
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To enhance access to bank financing for SMEs
that, in spite of having viable projects, are unable to access the required
bank finance for various reasons. The scheme addresses the following barriers
to lending: (i) inadequate collateral; (ii) lack of credit history; and (iii)
novel business market, sector or technology that is perceived by finance
providers as higher risk under current credit risk evaluation practices. The
GCLS caters for SMEs with larger loan requirements that exceed the maximum of
€750,000 under the SME Guarantee Scheme.
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State Aid
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The GCLS will be implemented in line with
the provisions of the De Minimis Regulation and the General Block
Exemption Regulation (GBER).
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Term of loans
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The Scheme offers two types of loan
tenors: with a maximum of 10 years and 15 years. The tenor of the loan
determines the applicable state aid regime as follows:
a) Up to 10 years – De Minimis
b) Up to 15 years – GBER
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Last date for inclusion of loans under the
scheme
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Up to 31 December 2024
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Last date for inclusion of loans under the
scheme if the loan provided by the MDB is to be covered by the EGF guarantee
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Up to 31 December 2022
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Benefit pass-through
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The benefit of the MDB guarantee shall be
passed on to the final beneficiaries in the form of lower interest rates
charged by the credit institutions, lower collateral requirements and a
longer loan term.
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Interest rates
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The interest rate charged to the end
beneficiary will be set by the credit institution. The MDB’s rate shall be
lower than that of the credit institution.
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Minimum loan size
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€750,001.
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Maximum loan size
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€10,000,000 (depending on term of loan and choice of
State Aid regime).
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Loan amounts - Compatibility with State aid
regimes
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The following are the maximum loan amounts
compatible with each of the two alternative state aid regimes:
- €10,000,000 – (€5,000,000 MDB and €5,000,000 Credit
institution) – GBER. -
€3,300,000 (€1,650,000 MDB and €1,650,000 Credit institution) – De Minimis.
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Borrower’s front contribution towards the
project
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Minimum of 20% upfront contribution.
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Moratorium on capital repayments
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Maximum 12 months (at the start of the repayment period). A
longer moratorium may be granted on a case by case basis subject to MDB
approval.
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Loan Purpose / Eligible Costs
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The projects financed under the GCLS must
not have commenced before the sanctioning of the loan. Moreover, the GCLS
cannot be used to refinance existing facilities held by the borrower.
Eligible costs under the GCLS are:
(A) Cost of investment in tangible and
intangible assets.
(B) Other investment-related working capital
including the estimated wage costs of employment directly created by the
investment project (subject to terms and conditions), calculated over a
period of two years, subject to a maximum amount of not more than 20% of the
total loan amount.
In order to be considered an eligible cost, an investment
shall consist of an investment in tangible and/or intangible assets relating
to:
· the establishment of new enterprises,
· expansion capital,
· capital for the strengthening and/or
stabilisation of the general activities of an enterprise,
· the realisation of new projects, penetration
of new markets or new developments by existing enterprises,
· working capital related to the new
investment,
· the acquisition of an asset belonging to
another establishment, subject to terms and conditions as provided by the
GBER regulation.
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Eligible borrowers
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The scheme is open to all SMEs in all economic sectors except
the excluded and prohibited activities. Furthermore, SMEs active in sectors
specifically excluded in Article 1 of the De Minimis Regulation, are
ineligible.
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Restricted and Prohibited Activities
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Click here for the full list.
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Application process for SMEs wishing to
benefit from the Scheme
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SMEs wishing to benefit from the Scheme
shall apply at an accredited credit institution. The application submitted by
the SME shall include the following information: (a) undertaking's name and
size; (b) description of the project, including its start and end dates; (c)
location of the project; and (d) list of project costs (e) business plan and
cash flow projections (f) recent financial statements.
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Accredited credit institutions
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Bank of Valletta
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Information for credit institutions interested in being accredited as intermediaries
The targeted GCLS global loan portfolio is €100 million of
which €50 million will be originated by MDB and €50 million by the
participating credit institutions. MDB shall
provide an additional guarantee of €30 million on the €50 million loans by the
participating credit institutions.
The global loan portfolio will be apportioned by the MDB
between the implementing credit institutions participating in the GCLS on a
first-come-first-served basis.
The guarantee fee
charged by the MDB on the 60% guarantee on the loan by the credit institution shall
be as follows:
- Loans with a maturity of 10-years agreed upon at inception of loan will carry
a guarantee fee of 1.49% on the guaranteed amount (equivalent to 0.89% at
facility level);
- Loans with a maturity of 12-years agreed upon at inception of loan will carry
a guarantee fee of 1.50% on the guaranteed amount (equivalent to 0.90% at
facility level);
- Loans with a maturity of 15 years agreed upon at inception of loan will carry
a guarantee fee of 1.51% on the guaranteed amount (equivalent to 0.91% at
facility level).
Accredited intermediary credit institutions benefit from:
- Lower
credit risk exposure;
- Efficient
use of capital and lower impairment charges to the profit and loss;
- Enhanced
opportunity to increase the size of the balance sheet and profitability;
- Greater
flexibility in adhering to the risk appetite framework;
- Higher
client retention due to increased fulfilment of customers’ requests;
- Enhanced
customer relationship.
To become an intermediary partner of the GCLS,
interested credit institutions need to fill in the Expression of Interest form
which can be downloaded from the link below. Applicants must be able to
address all points to the satisfaction of the MDB in order to be considered for
further negotiations. The negotiations with successful applicants are concluded
by the signing of a Risk Sharing Agreement and an Operational Agreement. These
agreements regulate the rights and obligations of the Parties and stipulate the
economic terms of the Scheme. In particular, they provide for the terms of
the guarantee, the inclusion and exclusion process of transactions covered by
the guarantee, eligibility criteria in relation to borrowers and transactions,
recoveries, general and information undertakings, representations by the
Parties, reporting forms and confidentiality obligations.
All relevant details and documentation can be found below:
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Application documents
for the GCLS Scheme
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