A new aid programme for businesses – state guarantees for large enterprises whose activities have been affected by the spread of Covid-19 – was approved at the meeting of the Cabinet of Ministers on July 14. Total funding of the programme is 40 million euro. The guarantees will be granted by Joint Stock Company “Development Financial Institution Altum”. The CM Regulations will enter into force and aid for businesses will be available following the harmonisation of the aid programme with the European Commission.
Financial instruments such as current asset loans, individual guarantees, portfolio guarantees, and short-term export credit guarantees have been available to these businesses so far. However, the funding available under these existing programmes is limited in conditions and scope (e.g. the maximum amount of individual guarantees is 5 million euro, the maximum guarantee amount is 50%, the aid is provided for existing investment and leasing transactions, as well as for new or existing current assets).
In cooperation with Altum, the Ministry of Economics has developed a guarantee programme for large enterprises with a view to supporting those viable undertakings in ensuring continuous economic activity, maintaining and increasing export volumes, whose need for financing was caused by Covid-19, as well as to encourage credit institutions to provide financing both in the form of investments and in the form of current assets, thereby stabilising Latvia’s economic activity by promoting the “non-freezing” of strategic, mature and innovative investment projects and the preservation of the growth potential of the national economy.
The guarantees will be made available to economic operators whose planned exports represent at least 50% of turnover over the next two years, and:
- where exports in the previous two financial years have represented at least 30% of turnover,
- if the borrower relocated its activity to Latvia from a country outside the European Economic Area,
- or if the borrower starts a new economic activity in Latvia.
The guarantees will be provided for new and existing financial services of a credit institution – a loan for investment and the financing of current assets, including credit limits (credit facility lines and overdrafts), financial leasing, financial leasing limits.
The guarantee will cover up to 90% of the outstanding principal amount of funding for new financial services and the deferred principal amount for existing financial services.
The guarantees will be provided to undertakings for up to 8 years. For existing financial services, the Altum guarantee will be available for up to the maximum duration, if the credit institution has deferred the principal amount payment for at least 12 months.
The amount of the financial service covered by the guarantee will not exceed 25% of the undertaking’s total turnover in 2019. For new financial services, the minimum guarantee will be 1.5 million euro, the maximum guarantee for the undertaking and its related group of persons will be 15 million euro. On the other hand, for the deferred principal amount, the minimum balance of the financial service may be 10 million euro, while the maximum guarantee for the undertaking and its related group of persons will be 15 million euro.
The programme is expected to support a total of around 25 economic operators by mobilising financial services of banks for an indicative amount of 450 million euro.
The CM Regulations “Regulations regarding Guarantees for Large and Medium-Sized Enterprises whose Activities Have Been Affected by the Spread of Covid-19” can be consulted on the website of the Cabinet of Ministers.