Guaranteed Co-Lending Scheme (GCLS)

Guaranteed Co-Lending Scheme (GCLS)

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 ​S​MEs 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.

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.

Terms & Conditions

Product Name

Guaranteed Co-Lending Scheme for SMEs (GCLS)

Objective

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.

State Aid

The GCLS will be implemented in line with the provisions of the De Minimis Regulation, the General Block Exemption Regulation (GBER) and Covid-19 Temporary Framework section 3.1 (TF).

Term of loans

The Scheme offers three types of loan tenors: with a maximum of 10 years, 12 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 12 years – GBER

c)     Up to 15 years – TF

Last date for inclusion of loans under the scheme

Up to 31 December 2024

Last date for inclusion of loans under the scheme if the loan provided by the MDB is to be covered by the EGF guarantee

Up to 31 December 2022

Benefit pass-through

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.​

Interest rates

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.

Minimum loan size

€750,001.

Maximum loan size

€10,000,000 (depending on term of loan and choice of State Aid regime).

Loan amounts - Compatibility with State aid regimes

The following are the maximum loan amounts compatible with​ each of the three alternative state aid regimes:

  - €10,000,000 – (€5,000,000 MDB and €5,000,000 Credit institution) – GBER.        - €3,300,000 (€1,750,000 MDB and €1,750,000 Credit institution) – De Minimis.    ​- €2,800,000 – (€1,400,000 MDB and €1,400,000 Credit institution) – TF

Borrower’s front contribution towards the project

Minimum of 20% upfront contribution.

Moratorium on capital repayments

Maximum 24 months (at the start of the repayment period).

Loan Purpose / Eligible Costs

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.

Eligible borrowers

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.

Restricted and Prohibited Activities

Click here​ for the full list.

Application process for SMEs wishing to benefit from the Scheme

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.

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 con​cluded 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:

Application documents for the SME Guarantee Scheme