The €350 million financial aid approved by the EU Commission last week has been entrusted to the Malta Development Bank (MDB) which now launched the COVID-19 Guarantee Scheme (CGS). Fully owned by the Government, the MDB was established in 2017 by the Malta Development Bank Act. Its strategic objective is to offer financing facilities that support productive and viable operations where the market is unable or unwilling to accommodate such activities on its own in whole or part.
The CGS aims at aiding businesses facing cashflow disruptions, as a result of the COVID-19 pandemic, through guarantee loans granted by local commercial banks accredited by the MDB. Essentially, the CGS will enable these banks to leverage the €350 million fund into a total of €777.8 million in new working capital loans to support all types of businesses in Malta.
The MDB which is managing and implementing this scheme has made it available to businesses of any size. Under the CGS, the eligible working capital costs include salaries, rental costs, unpaid invoices and maintenance costs, among others. However, the CGS will not cover any restructuring or rescheduling of existing facilities.
The loan amounts are set at a maximum of €5 million, depending on the size, wage bill and turnover of the applicant. This scheme also enables businesses to benefit from improved access to liquidity, at lower interest rates and with a repayment period of up to six years. Indeed, commercial banks will be required to give its beneficiaries an interest rate reduction of at least one percentage point on the average lending rate. Additionally, a six-month moratorium on interest payments and capital repayments, which may be further extended to one year, on a case by case basis, seeks to provide a much-needed breathing space for businesses during this crisis.
Loans under this scheme will be available only from commercial banks accredited by the MDB and final approval will rest with the commercial banks themselves.
The MDB will be issuing further guidance and clarification on the CGS in the coming days.
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