A New Recovery Programme to Support Business with Fund of Funds Guarantees
‘Today we are launching the Recovery Programme which will support business by offering guarantees issued by the Fund of Funds. That means that starting today, managers of small and medium-sized businesses will be able to go to those banks that have already signed up for the programme and get their recovery loan, and within a week other banks will be offering the same opportunity,’ said Kiril Petkov, Minister of Economy. This announcement came today as, together with Finance Minister Assen Vassilev, representatives of the Fund of Funds and partner banks, he presented the programme's main parameters and advantages at a Ministry of Finance press conference.
Minister Petkov went on to explain that companies applying for the loans would be expected to have a track record of at least three years. The loan would require no surety, its term could be up to 7 years, with a grace period of 12 months. ‘We are very glad that despite the budget limitations, successful businesses that can embark on a period of recovery will have the liquidity needed to do so. I believe that all small and medium-sized businesses will be able to benefit from the programme, and we will see our economy revamp. This is a programme in which government will partner with private capital, as represented by the banks’, Minster Petkov noted.
In the Recovery Programme, we are mobilising up to BGN 2.5 billion in financing targeted at business. Here, each one plays their proper role, with government assuming the systemic market risk, so that a large part of our companies can continue to operate and be able to develop, and with banks assuming the responsibility, knowing their customers well, to assess the individual risk involved in each company,’ Minister of Finance Assen Vassilev said. In his view, this arrangement provides an opportunity for companies that are viable but have already used up a large portion of their security during the past year and a half of the crisis to borrow an investment or a working capital loan and continue to develop.
The press conference was attended by Diana Miteva, Executive Director and Head of Retail Banking, DSK Bank; Desislava Simeonova, member of the KBC Bulgaria Country Team, Board Member and Executive Director, Corporate Banking and SMEs, UBB; Dobromir Dobrev, Executive Director, Raiffeisenbank; Nadia Koshinska, Board Member, First Investment Bank; Dimiter Shumarov, Executive Director, CFO and Board Member, PostBank; and representatives of the Fund of Funds.
The goal of the programme is to facilitate access of business to loans for the recovery of their operations after the gradual relaxation of measures that were put into place in relation to the COVID-19 pandemic. Companies will be able to obtain fresh financial resources, mostly to meet their current liquidity requirements, but also for new investments, transformation and growth. The change in the terms of the guarantee enable swift lending and minimal administrative burden and no security pledging.
For the successful implementation of those advantageous terms, the government, acting through the Fund of Funds, proposed to banks to raise the credit risk covered by public resources based on the BGN 158 million-worth of guarantees extended last year under the Operational Programme Innovation and Competitiveness (OPIC) 2014—2020 co-financed by the European Regional Development Fund. The public resources already covers up to 50 % of bank losses on all loans, and each individual loan is covered by the Fund of Funds at 80 %, with 20 % of the risk to be assumed by the banks. The financing allocated to first-loss portfolio guarantees under the Programme will be increased gradually over the coming months as OPIC mobilises and allocates additional resources to the Fund of Funds. Using that financing, the FoF will be able to provide guarantees to set up new loan portfolios with all interested banks in Bulgaria.
The main advantages of the programme being implemented in partnership with the banks are as follows:
- Broad access to business loans without the need to set up security; unsecured credit, save for personal guarantees pledged by the owners;
- Fast-track approval procedures and the opportunity for swift disbursal;
- Possibility to negotiate a 12-month grace period;
- Possibility to extend repayment to up to 84 months;
- Maximum clarity and minimisation of the administrative burden for the client;
- Possibility to borrow up to BGN 3 million and finance up to 70 % of the larger of the 2019 or 2020 turnover.
- Accessibility: The financing resources are locally accessible from all branches of the partner banks. This enables a comprehensive coverage of the national territory, wherever there are businesses needing liquidity support and fresh money.
The FoF partner banks that have already signed agreements to participate in the Programme are First Investment Bank, DSK Bank, Tokuda Bank, UBB, Raiffeisenbank, PostBank.