SME Guarantee Scheme

SME Guarantee Scheme

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 b​e 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.

Terms & Conditions

Product Name

SME Guarantee Scheme

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.

Structure

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.

Portfolio Volume

€80,000,000 (to be allocated among accredited credit institutions on a first come first served basis).

Last date for inclusion of loans under the scheme

31/12/2024

Last date for inclusion of loans under the scheme covered by the EGF guarantee

31/12/2022

Term of Loan

Maximum 10 years.

Size of Loan

Facilities of €10,000 up to €750,000, The minimum loan size may vary from one financial intermediary to another.

Security

Take up of collateral is restricted to a maximum of 20% of the facility amount.

State Aid Regime

De Minimis.

Loan eligibility

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).

Eligible applicants

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.

Restricted and Prohibited Activities

Click here​ for the full list.

Benefits

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.

Application process

The scheme will be available through credit institutions which are selected as intermediary partners and accredited by the MDB.  A list of accredited partners will be announced once the selection is made following this Call for Expression of Interest.

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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 g​uaran​tee 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 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/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:

Application documents for the SME Guarantee Scheme