OPEN CALL FOR EXPRESSION OF INTEREST BY
CREDIT INSTITUTIONS
Scheme Overview
The SME
Guarantee Scheme (SGS) is an uncapped portfolio guarantee scheme. The MDB
provides an uncapped guarantee of 80% on a portfolio of loans of up to
€80million generated by the accredited credit institutions. This MDB facility
shall enabling the credit institutions to be more responsive to the borrowing
requirements of smaller businesses, which, in turn, allows these businesses to
fulfil their growth ambitions. The SGS aims at enhancing SME access to bank
credit for new investment as well as other purposes; including for working
capital related to new investment and business transfers.
The SGS
is backed by the Pan-European Guarantee Fund (EGF) programme of the European
Investment Fund (EIF).
Information for SMEs
The SGS facilitates increased lending
to smaller businesses that are viable but unable to obtain the required amount
of finance from their commercial bank due to:
- Insufficient or inadequate collateral to meet
the bank’s normal security requirements,
- The novelty or nature of the business venture
that may fall outside the risk appetite and tolerance of credit institutions,
- Other factors such as the required repayment
period for which credit institutions may not be willing or able to provide the
required financing in whole or part.
The purpose of the SGS is to
assist SMEs, including start-ups, by enhancing their access to bank finance.
Eligible SMEs benefit from:
- enhanced access to credit as insufficient
collateral and lack of credit history should not remain an obstacle when
seeking finance from the banking sector,
- better terms and conditions and a longer repayment
period,
- lower interest rates as a result of the credit
risk protection from the MDB’s uncapped guarantee of 80%.
The facility will be made available through accredited
credit institutions that act as intermediary partners of the MDB. The list of accredited
credit institutions will be announced here soon.
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Terms & Conditions
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Product Name
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SME Guarantee Scheme
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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.
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Structure
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The MDB provides an uncapped guarantee of
80% on the loan portfolio of the financial intermediary. The scheme will be
open to all accredited credit institutions.
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Portfolio Volume
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€80,000,000 (to be allocated among accredited credit
institutions on a first come first served basis).
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Last date for inclusion of loans under the
scheme
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31/12/2024
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Last date for inclusion of loans under the
scheme covered by the EGF guarantee
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31/12/2022
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Term of Loan
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Maximum 10 years.
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Moratorium
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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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Size of Loan
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Facilities of €10,000 up to €750,000, The minimum loan size
may vary from one financial intermediary to another.
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Security
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Take up of collateral is restricted to a maximum of 20% of the
facility amount.
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State Aid Regime
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De Minimis.
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Loan eligibility
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The purpose of the financing covers a wide spectrum of
possible activities including:
· 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,
· investment-related working capital,
· business ownership transfers, in whole or in
part, as long as this does not create or enhance a position of significant
market dominance, conforming with applicable legislation (including but not
limited to S.L 379.08).
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Eligible applicants
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The scheme is open to all SMEs in all economic sectors except
the excluded and prohibited activities of the MDB and the EIF. 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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Benefits
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Besides accessing finance not otherwise available, eligible
SMEs benefit from: a longer repayment period, lower collateral requirements
and lower interest rates as a result of the credit risk protection from the
MDB’s guarantee and the backing of the EGF.
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Application process
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The scheme will be available through credit institutions which
are selected as intermediary partners and accredited by the MDB. The first accredited intermediary partner is APS Bank. More accredited partners will be announced soon.
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Information for credit institutions interested in being accredited as intermediaries
Consistent with MDB’s objective to improve
access to finance and to diversify the financing options to SMEs, the MDB seeks
to magnify the outreach of its promotional role by collaborating with credit
institutions to stimulate more active SME lending in Malta by offering the
opportunity for banks to act as MDB’s intermediary partners for the SGS. The
facility enables lenders to be more responsive to the borrowing requirements of
smaller businesses, which, in turn, allows smaller businesses to fulfil their
investment plans and growth ambitions. This facility therefore helps generate a
positive contribution to the Maltese economy in terms of new investment,
employment opportunities, stronger competitiveness and higher economic
activity.
The facility is structured as follows:
(a) The
MDB provides an uncapped portfolio guarantee of 80%, which means that each and
every loan under the scheme will be covered by a guarantee of 80%, without a
portfolio capping.
(b) A
guarantee fee of 1.00% at guarantee level (equivalent to 0.8% at loan level) is
payable by the intermediary partner to the MDB in respect of the credit risk
protection. The guarantee fee is collected by the intermediary partner as part
of the final interest rate on the outstanding loan balance.
Intermediary partners 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.
The intermediary partner shall pass on the
benefit from MDB’s guarantee to the SME in the form of a lower risk premium and
lower collateral requirements.
To become an intermediary partner of the SGS,
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/s. 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 SME Guarantee Scheme
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