State Aid scheme to support SME-s amidst the economic crisis triggered by the COVID-19 pandemic

The state aid provided under the scheme to support SME-s amidst the economic crisis triggered by the COVID-19 pandemic (the “State Aid Scheme”) is compatible with the common market, in accordance with the European Commission’s Temporary Framework Communication (2020/C91I/01) and is conditional upon the European Commission’s clearance.

The State Aid Scheme is approved by Emergency Governmental Ordinance no. 42/2020 (“EGO no. 42/2020”).

I.TYPES OF AID

1. Loan guarantees of 80% of the financing value for investment loans and/or working capital loans/credit lines (art.1, para 3), letter a) of EGO no. 110/2017, as subsequently amended), observing the following thresholds:

  • Maximum aggregate value of RON 5 million for working capital loans/credit lines; and
  • Maximum aggregate value of RON 10 million for investment loans

Provided that the above thresholds are not exceeded, a qualifying beneficiary may apply for the financing amount representing the highest of:

  • Double the amount by way of payroll expenditure, including mandatory social contributions due by the employer in respect of salaried income and income treated as salaried income for 2019; as regards enterprises incorporated after 1 January 2019, the maximum loan amount may not exceed the amount estimated for the first 2 years of activity; or
  • 25% of the beneficiary’s 2019 net turnover, or the gross income or annual income quota (in Romanian norma de venit), respectively, for self-employed persons, as the case may be, as per the tax returns filed with the competent authorities for 2019; or
  • Such amount as results from the beneficiary’s liquidity needs, which may include both working capital expenditures and investment expenditures, provided that the beneficiary produces substantiating documents; the loan is not to exceed the beneficiary’s liquidity needs (indicated at the time of receiving the loan) for the following 18 months.

2. Loan guarantees of 90% of the value of financing for working capital credits/credit lines for microenterprises and small enterprises (art.1, para 3), letter b) of EGO 110/2017, as subsequently amended), observing the following thresholds:

  • Maximum aggregate value of RON 500,000 for loans/credit lines for microenterprises; and
  • Maximum aggregate value of RON 1 million for loans/credit lines for small enterprises,

Provided that the above thresholds are not exceeded, a qualifying beneficiary may apply for the financing amount which represents the highest value out of the amounts referred to at point 1 above.

The aggregate value of state guaranteed financing that may be obtained under points 1 and 2 above may not exceed RON 10 million, within the highest of the amounts referred to at point 1 above.

Microenterprises and small enterprises cannot be granted guarantees for loans/ credit lines for working capital both pursuant to points 1 and 2 above. However, they can cumulate guarantees for investment loans pursuant (point 1) with loans/ credit lines for working capital (point 2). The maximum aggregated value of the financing guaranteed by the state according to both points 1 and 2 above is RON 10 million.

State Aid Scheme’s maximum budget: the maximum value of guarantees which may be granted within the scheme for year 2020 is limited to RON 15 billion.

Maximum duration of financing:

  • 72 months for investment loans, no extension being possible; and
  • 36 months for working capital loans/credit lines under points 1 and 2 above, with the possibility to extend for not more than 36 months.

Maximum duration of guarantees: 6 years

Risk fee: applicable for credits under art. 1 para 3) letters a) and b) of EGO 110/2017, as amended. The risk fee is the amount which the beneficiary owes the Finance Ministry to cover the risk of guaranteeing the loans/credit lines under the program. The risk fee payment obligation is covered by the grant aid received by the beneficiary under the State Aid Scheme. When the applicability of the State Aid Scheme ceases, SME-s taking credits under the program owe the Finance Ministry the risk fee. The risk fee level is set annually by order of the finance minister.

3. State aid in the form of grant

Calculation and maximum value. SME-s having contracted guaranteed credits/credit lines (as per art. 1, para 3), letter a) or b) of EGO 110/2017, as subsequently amended) benefit from grants within the sum total of the risk commission, administration fee relating to the guarantee and interest on credits/credit lines, but not more than the RON equivalent of EUR 800,000 per enterprise.

Exchange rate. The exchange rate published by the National Bank of Romania as ruling on the day of the financing agreement to calculate the maximum EUR 800,000 EUR ceiling.

Specific requirements for certain sectors. Different conditions (including lower thresholds) apply to agriculture, fisheries and aquaculture. For instance, the aid must not exceed EUR 120,000 for each applicant in the field of fisheries and aquaculture or EUR 100,000 for each applicant engaged in the primary production of agricultural products.

II.ELIGIBILITY CRITERIA

Who qualifies: SME-s in all sectors, except for those in ineligible fields/sectors, who:

  • are microenterprises, small or medium-sized enterprises;
  • were not subject to decisions on the recovery of state aid or made payment under any such decisions, if issued;
  • have not applied for other types of state aid for the same eligible costs;
  • were not in difficulty, within the meaning of art. 2 point 18 of Regulation (EU) no. 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, amended and supplemented by Regulation (EU) no. 1.084/2017, on 31 December 2019, but encountered difficulties later on, due to the COVID-19 outbreak;
  • are not defendants in pending litigations in which the Public Finance Ministry and/ or the partner credit institution are plaintiffs;
  • do not have outstanding loans, including for leasing financing, in the last 6 months prior to 31 December 2019, or, if such outstanding debts exist, they are classified under categories A, B or C in the database of the Credit Risk Central;
  • are not prohibited from issuing cheques as at 31 December 2019 and does not appear in the database of the Payment Incidents Central with major incidents regarding promissory notes in the last 6 months prior to 31 December 2019;
  • there are no insolvency proceedings opened against the SMEs;
  • do not have outstanding fiscal obligations and other budgetary debts managed by the fiscal authorities or, if there are such outstanding debts, the SMEs undertake to pay them from the loan/ credit lines for working capital granted within the State Aid Scheme;
  • submit a written undertaking not to make redundant until 31 December 2020 staff on their payroll as at 4 April 2020.

Who is not eligible: SME-s in the following fields/sectors: gambling and betting, manufacturing and trading of armaments, ammunition, explosives, tobacco, alcohol, substances under domestic control, narcotic and psychotropic plants, substances and preparations, investigative and protection business.

III. DURATION OF STATE AID SCHEME

The State Aid Scheme is in force starting from 4 April 2020 until 31 December 2020

Selection of beneficiaries, issuance of guarantees/financing agreements for investment loans or working capital credits will be performed starting with 4 April 2020 until 31 December 2020

Payment of grants: starting from 4 April 2020 until 31 March 2021, with the possibility of extension as per the terms applicable for interest subsidization under EGO no. 42/2020.

IV. TARGETED NUMBER OF BENEFICIARIES: 40,000

V. PROCEDURE FOR GRANTING AID: has been approved through the Implementing Rules to the Emergency Governmental Ordinance no. 110/2017.

SMEs can apply for the State Aid Scheme by following the next steps:

  • Submit the application online on the platform available at imminvest.ro;
  • The potential beneficiary which applies should:
  • fill in the identification data;
  • attach the SME statement provided by Annex 1 of Law no. 346/2004 on stimulating the establishment and development of small and medium-sized enterprises, as subsequently amended, signed and dated in pdf format;
  • attach the de minimis statement, according to the type of beneficiary (medium-sized enterprise, small enterprise, microenterprise);
  • fill in the option regarding the requested loan;
  • Online registration is held in continuous session until the RON 15 billion limit is reached;
  • The software application will automatically generate the registration number, as well as a confirmation message regarding the registration. Once verification of the data and documents registered by the potential beneficiary has been carried out, the agreement in principle on eligibility under the program will be issued;
  • The online registration can be performed only once, the electronic registration application not allowing the same potential beneficiary to register twice. For duly justified reasons, the beneficiary may request the National Credit Guarantee Fund for SMEs to amend the online application.
  • The National Credit Guarantee Fund for SMEs will make available in electronic format to the credit institution selected by the potential beneficiary the data and documents registered within the online platform, as well as the agreement in principle on eligibility under the program.
  • The credit institution will analyze the beneficiary’s application and issue internally the decision granting the investment loan, respectively the loan/ credit line, in accordance with the beneficiary’s request, determining the amount of the credit in accordance with the internal lending rules, up to the maximum amount of the respective credit facility (points 1 and 2).
  • Subsequently, the beneficiary, the credit institution and the National Credit Guarantee Fund for SMEs will sign the guarantee agreement and the financing agreement

VI. STATE AID SCHEME ADMINISTRATION. The scheme will be administered by the National Credit Guarantee Fund for SME-s.

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