On Wednesday, February 17, the European Commission approved the extension of the interest rate subsidy scheme for new business loans in Cyprus for another six months, until June 30, 2021.
Thus, local companies will again be able to count on government support.
As you may know the program assumes a reduction in interest rates on loans for the next four years. At the same time, for the first two years, interest rates for the affected enterprises and their employees are reduced to 3.5%. And the next two years they are reduced by 2% of the terms of the original contract for medium-sized businesses and by 1.5% - for large businesses.
The scheme aims to support the self-employed, as well as small, medium and large enterprises, who are facing liquidity problems as a result of the coronavirus pandemic.
According to the criteria, the beneficiaries of the plan can be:
- All medium and large companies that did not have any problems as of December 31, 2019. They are required to present the appropriate certificate from the accounting department.
- All self-employed and small businesses that have filed a declaration that they were not subject to liquidation / bankruptcy, and did not receive any assistance from the state as of December 31, 2019.
The plan covers loans approved from March 1, 2020 to June 30, 2021 in the Republic of Cyprus. As well as loans that will be approved by June 30, 2021 through the European Investment Bank (EIB), the Cyprus Enterprise Fund and the Pan-European Guarantee Fund.
At the same time, the scheme doesn't include loan of restructuring, as well as business loans, the interest rate of which is subsidized by other special government programs.
The new loans are provided for the purpose of increasing liquidity in the economy and cannot be used to pay off existing lines of credit, whether serviced or not, or as collateral for the restructuring of any other loan.
Maximum loan amount:
- must not exceed the annual salary of the company or self-employed person for 2019 or the last available year
- cannot exceed 25% of the total turnover of the company or self-employed person
- for the self-employed and companies in the field of agriculture, fisheries and aquaculture should be in the range from 100 thousand euros to 120 thousand euros, depending on their type of activity.
At the same time, the maximum threshold for the loan amount at which the interest rate are subsidized will be no more than 800 thousand euros.
At the same time, the total loan amount may exceed the size of the subsidized loan. In this case:
- for loans approved from 1 March 2020 to 25 June 2020 (the date of the European Commission's decision on the plan), the amount of which exceeds 800,000 euros, the interest rate subsidy will correspond to the amount of 800,000 euros (for example, the total initial loan EUR 1.6 million, interest subsidy calculated at 50% of capitalized interest)
- for loans approved from June 26, 2020, the amount of which exceeds 800,000 euros, the loan will be repaid first, for which the interest rate subsidy is granted.
As for the issuance of new business loans under the program, many Cypriot banks have already applied for participation in it. Among them are:
- Аncoria Bank
- Hellenic Bank
- Bank of Cyprus
- RCB Bank
- Alpha bank
- National Bank
For loans, the interest rate on which is subsidized, the interest capitalization will be carried out every six months, in June and December.
Under the terms of the plan, interest rate subsidies are available to applicants until the budget is exhausted.
In total, about 180 million euros have been allocated for these purposes.