The GCLS is a risk-sharing facility involving co-lending of up to €100 million between the MDB and the accredited credit institutions on a 50:50 basis. The MDB provides an interest rate reduction on the part of the loan granted by the MDB and a guarantee of 60% on the credit institution’s part of the lending.
The GCLS offers favourable financing terms for bankable projects with a special focus on SMEs particularly those involving innovation, digitalisation and, more broadly, the preservation and enhancement of competitiveness; socially-oriented initiatives, particularly those involving knowledge generation, education, health and social inclusion; investment that addresses environmental issues such as water usage, water treatment, waste treatment, reduction and reuse; and investment aimed at achieving a high level of sustainability or to promote the circular economy.
The GCLS caters for SMEs with large loan requirements that exceed the maximum of €750,000 under the SME Guarantee Scheme (SGS).
The incentive guidelines of this facility are available here.
Information for SMEs
The purpose of the financing under GCLS covers:
- 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.
The Scheme is open to all SMEs in all economic sectors. In order to be eligible, SMEs must:
- have a viable business proposal;
- show evidence that they are able to repay the facility;
- run a commercial activity in the non-excluded activities sector.
In view of the credit enhancement and substantially reduced credit risk exposure provided by the MDB’s uncapped guarantee of 60% on each facility provided by the partner bank, the credit institution is expected to pass on the benefit of the guarantee to the largest extent possible to the final beneficiaries including in the form of lower interest rates, longer loan term, enhanced access to increased finance and lower collateral requirements. In addition, the MDB’s part of the loan shall have a lower interest rate than that of the credit institution in order to enhance further the attractiveness of the package.
Terms & Conditions
|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. The GCLS caters for SMEs with larger loan requirements that exceed the maximum of €750,000 under the SME Guarantee Scheme.|
|State Aid||The GCLS will be implemented in line with the provisions of the De Minimis Regulation and the General Block Exemption Regulation (GBER)|
|Term of loans||The Scheme offers two types of loan tenors: with a maximum of 10 years and 15 years. The tenor of the loan determines the applicable state aid regime as follows:|
a) Up to 10 years – De Minimis
b) Up to 15 years – GBER
|Last date for inclusion of loans under the scheme||Up to 31 December 2024|
|Benefit pass-through||The benefit of the MDB guarantee shall be passed on to the final beneficiaries in the form of lower interest rates charged by the credit institutions, lower collateral requirements and a longer loan term.|
|Interest rates||The interest rate charged to the end beneficiary will be set by the credit institution. The MDB’s rate shall be lower than that of the credit institution.|
|Minimum loan size||€750,001|
|Maximum loan size||€10,000,000 (depending on term of loan and choice of State Aid regime)|
|Loan amounts – Compatibility with State aid regimes||The following are the maximum loan amounts compatible with each of the two alternative state aid regimes: |
▪ €10,000,000 – (€5,000,000 MDB and €5,000,000 Credit institution) – GBER.
▪ €3,300,000 (€1,650,000 MDB and €1,650,000 Credit institution) – De Minimis.
|Borrower’s front contribution towards the project||Minimum of 20% upfront contribution.|
|Moratorium on capital repayments||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.|
|Loan purpose / eligible costs||The projects financed under the GCLS must not have commenced before the sanctioning of the loan. Moreover, the GCLS cannot be used to refinance existing facilities held by the borrower. Eligible costs under the GCLS are:|
a) Cost of investment in tangible and intangible assets.
b) Other investment-related working capital including the estimated wage costs of employment directly created by the investment project (subject to terms and conditions), calculated over a period of two years, subject to a maximum amount of not more than 20% of the total loan amount.
In order to be considered an eligible cost, an investment shall consist of an investment in tangible and/or intangible assets relating to:
▪ 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,
▪ working capital related to the new investment,
▪ the acquisition of an asset belonging to another establishment, subject to terms and conditions as provided by the GBER regulation.
|Eligible borrowers||The scheme is open to all SMEs in all economic sectors except the excluded and prohibited activities. Furthermore, SMEs active in sectors specifically excluded in Article 1 of the De Minimis Regulation, are ineligible.|
|Restricted and prohibited activities||DOWNLOAD THE FULL LIST|
|Eligible borrowers||SMEs wishing to benefit from the Scheme shall apply at an accredited credit institution. The application submitted by the SME shall include the following information:|
a) undertaking’s name and size;
b) description of the project, including its start and end dates;
c) location of the project;
d) list of project costs ;
e) business plan and cash flow projections;
f) recent financial statements.
|Accredited credit institutions||Bank of Valletta |
HSBC Bank Malta
Information for credit institutions interested in being accredited as intermediaries
The targeted GCLS global loan portfolio is €100 million of which €50 million will be originated by MDB and €50 million by the participating credit institutions. MDB shall provide an additional guarantee of €30 million on the €50 million loans by the participating credit institutions.
The global loan portfolio will be apportioned by the MDB between the implementing credit institutions participating in the GCLS on a first-come-first-served basis.
Accredited intermediary credit institutions 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.
To become an intermediary partner of the GCLS, 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. 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.