The MDB COVID-19 Small Loans Guarantee Scheme (SLGS) is intended to support smaller businesses in taking out loans under the MDB COVID-19 Guarantee Scheme (CGS) without the need to provide high levels of soft collateral in the form of personal guarantees. Through the SLGS, the MDB provides additional protection to the banks by subordinating its rights to those of the banks in respect of the 10% of the loan which is not covered by the 90% guarantee under the CGS. In return, the MDB is obliging the banks not to request soft collateral in excess of 20% of the loans extended to SMEs. The SLGS is therefore a carefully thought equitable solution that addresses the concerns of smaller businesses regarding the high levels of soft collateral requested by banks (normally in the form of personal guarantees), while giving due regard for the risks faced by the intermediary banks.
The European Commission on 29 July 2020 approved the SLGS as a sub-scheme of the CGS under the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak. In the context of this measure, the European Commission also approved a more flexible interpretation of the share capital required by micro and small businesses to qualify for assistance.
The SLGS applies to loan contracts of up to €250,000 that are concluded under the scheme as from 29 July 2020. Existing loan contracts of up to €250,000 that were concluded before this date are also eligible to benefit from this new scheme provided that the banks amend these contracts to reflect the new conditions. The MDB is holding discussions with the banks intermediating the CGS in this regard.
Where to Apply for a Loan
Business undertakings wishing to avail themselves of the facilities covered by the MDB’s SGLS should contact any one of the accredited banks listed below to enquire on their eligibility and other information on the scheme. Business undertakings that are already availing themselves of loans of up to €250,000 under the CGS are also eligible to benefit from the SGLS and are encouraged to get in touch with their bank if listed hereunder to obtain more information on how to benefit from the SGLS:
- Bank of Valletta
- HSBC Bank Malta