Guarantee scheme for new credits

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Back on 27 March, the guarantee scheme (state guarantee) for bridging loans was announced to bail out companies affected by the corona crisis. With this measure, banks are encouraged to provide short-term credit to companies that are healthy but experiencing financial difficulties as a result of this crisis.

 

The guarantee scheme applies to all new credits with a maximum maturity of 12 months and is limited to a credit amount of EUR 50 million. This state guarantee encourages banks to provide credit to companies facing liquidity problems. However, banks are not obliged to accept all requests for credits. A well-prepared credit application is therefore crucial when requesting a credit.

 

The guarantee scheme always complements the deferral of capital payments. The two arrangements are therefore not mutually exclusive. On the contrary, with certain banks it is not possible to take out a bridging loan if no payment deferral has been requested.

The conditions of eligibility are therefore similar to those of the deferral of capital payments:

  1. the company had to be viable and had no arrears on its existing loans, taxes or social security obligations on 29 February, and
  2. the credit amount must be used to finance activities in Belgium.

This means that companies which were unable to meet their obligations before the outbreak of the corona crisis cannot benefit from this scheme.

 

Maximum interest rate

All credits under this guarantee scheme will be subject to a maximum interest rate of 1.25% per annum. The banks have indicated that, in principle, they will always apply this maximum rate. In addition to the interest, a fee is owed for the state guarantee: 0.25% per year for SMEs and 0.50% for other companies, in accordance with the European definition of SMEs. In addition, one-off admin costs and periodic management fees may also be charged.

 

Alternative solutions

Contrary to the deferral of capital payments, banks have no obligation to approve an application for credit. Those who are unable to call on a bridging loan should look for other ways to meet their liquidity needs.

In some cases, the Flemish government body PMV can provide a solution. It will make EUR 250 million available to provide subordinated loans to start-ups, scale-ups and SMEs. The details are not yet known but we will follow up on this further.

In addition, PMV also facilitates other financial products that can be used during this crisis. For example, all SMEs can use a win-win loan where friends or family lend money to the company, or they can use the extended guarantee scheme already available before this crisis.

 

Do you need help with applying for a bridging loan or drawing up a cash flow analysis, or would you like more information about the alternative forms of financing? If so, feel free to contact one of our specialists.