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S​UPPORTING BUSINESSES IMPACTED BY COVID-19

 

MDB COVID-19 GUARANTEE SCHEME (CGS)

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
   o Small and medium-sized enterprises (SMEs): €2 million
   o Large enterprises: €5 million
   o 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 during which the moratorium applies on both capital and interest repayments. Thereafter, the moratorium can be either on capital plus interest, or, on capital only, at the discretion of the commercial bank. In terms of the European Commission decision SA.62499 (2021/N), the maximum moratorium period has been extended from 12 months to 18 months on a case by case basis.  Moratoria granted on working capital loans under the CGS are distinct from those granted on loans that are covered by the Central Bank of Malta’s Directive 18 “On Moratoria on Credit Facilities in Exceptional Circumstances” which was reactivated in January 2021. More specifically, CGS loans are business loans for working capital that were sanctioned by the accredited banks from April 2020 onwards under the MDB Scheme’s terms and conditions which are in conformity with the European Commission’s Temporary Framework for State aid measures.  On the other hand, the moratoria governed by CBM Directive 18 are in respect of loans that were advanced by banks prior to April 2020; such moratoria are governed by the guidelines issued by the European Banking Authority. The deadline for applications for moratoria governed by the CBM Directive 18 expire(d) on the 31st of March 2021. ​

Eligibility Period: Following the prolongation of the Temporary Framework, the applicability period of the CGS has been extended from 30 June 2021 to 30 September 2021 in terms of the European Commission decision SA.62499 (2021/N).​

​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:

   o Salaries of employees, including social and health security payments
   o Lease of establishment, including rental costs, energy and water bills, fuel etc.
   o 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
   o Acquisition of material and stock for continuation of business
   o 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
   o Maintenance costs
   o Bond coupons on listed securities
   o Regular loan repayments (interest and capital) of bank loans to businesses approved on or prior to 23 March
       2021, subject to certain terms and conditions.​

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:

Co​mpany category

Staff headcount

     Turnover

       or

Balance sheet total

Medium-sized

< 250

≤ € 50 m

≤ € 43 m

Small

< 50

≤ € 10 m

≤ € 10 m

M​icro

< 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%


Where to Apply for a Loan

Business undertakings wishing to avail themselves of the facilities covered by the MDB’s CGS should contact any one of the accredited banks listed below to enquire on their eligibility and other information on the CGS.   

The following are the accredited commercial banks offering facilities under the CGS:

   o APS Bank (Click Here​ to visit APS Bank​ information page)
​   o Bank of Valletta (Click Here​ to visit Bank of Valletta information page)
​   o BNF Bank (Click Here​ to visit BNF Bank information page)
​   o FCM Bank (Click Here​ to visit FCM Bank information page)
​   o FIMBank plc (Click Here​ to visit FIMBank plc information page)
​   o HSBC Bank Malta (Click Here to visit HSBC Bank Malta information page)
​   o Izola Bank (Click Here​ to visit Izola Bank information page)
​   o Lombard Bank (Click Here​ to visit Lombard Bank information page)
​   o MeDirect (Click Here​ to visit MeDirect information page)

The MDB will soon be uploading a FAQ section to provide more information and clarifications on the CGS.

Information for Potential Financial Intermediaries


The CGS is open to all credit institutions licensed in Malta that during 2019 were providing banking facilities to local enterprises for working capital purposes.  

The CGS covers 90% of each facility, capped at 50% of the actual portfolio volume. 
A copy of the Term Sheet governing the CGS is available on-demand from the MDB.

In view of the credit enhancement and substantially reduced credit risk exposure provided by the CGS, the advantages should be passed on to the largest extent possible to the final beneficiaries including in the form of:

   o higher volume of finance,
   o riskier portfolio, 
   o lower collateral requirement, and 
   o lower interest rates

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. ​

To become a financial intermediary of the CGS, interested credit institutions need to submit the Expression of Interest Form which can be downloaded from this link.

The MDB and each financial intermediary will enter into a Risk Sharing Agreement and Service Level Agreement, regulating the relationship of the parties in relation to the CGS.  Copies of the Risk Sharing Agreement and Service Level Agreement governing the CGS are available on-demand from the MDB.
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More Information 

 Times of Malta ​​​​​​​​​