Updates on the Malta Development Bank’s COVID-19 Guarantee Scheme

In a session organised this morning by the Malta Institute of Accountants (MIA) for its members, Professor Joseph Bonnici, the Malta Development Bank’s (MDB) Chairman, together with several of his colleagues, provided MIA members with updates on the MDB’s COVID-19 Guarantee Scheme (CGS).

The CGS is part of the wider package of Government’s COVID-19 Response Support Programme.

A Guarantee Fund of €350 million has been allocated by Government for the purpose of guaranteeing loans granted by commercial banks in Malta to meet new working capital requirements of businesses facing cashflow disruptions due to the effects of the COVID-19.

The CGS will enable the commercial banks to leverage Government’s guarantees up to a total portfolio volume of €777.8 million to support all types of businesses.

The CGS has been set up to provide a guarantee of 90% of working capital loans extended by accredited banks to businesses, providing banks with the necessary reassurance, security and capital relief required to allow liquidity to continue flowing to businesses.

Availability period and eligible beneficiaries

The CGS covers all new facilities approved as from the date of the launch of the scheme (3rd April 2020) until 31st  December 2020. Eligible beneficiaries comprise all businesses established and operating in Malta, irrespective of size and sector, that are negatively impacted by the COVID-19 outbreak.

Maximum loan amounts

The maximum loan amounts per beneficiary have been capped at €2 million for SMEs and €5 million for large enterprises. However, higher amounts can be availed if prior ad-hoc approval by the MDB is secured. The higher amounts have been capped at €4 million for SMEs and €8 million for large enterprises.

However, total facilities made available should not exceed:

• Double of the annual wage bill of the beneficiary for 2019; OR
• 25% of total turnover of the beneficiary in 2019.

Companies with a limited operating history are required to submit two year projections instead.

Other loan features

Other features of loans granted under the CGS scheme include:

• A reduction in interest rates, especially for smaller enterprises;
• A loan term of a minimum 18 months to a maximum of 48 months. The term can increase to 72 months, subject to additional terms and conditions.
• A moratorium for a minimum period of 6 months with the possibility to extend to one year on a case-by-case basis. The moratorium applies to both interest and capital repayments.

Eligible costs

The CGS covers new working capital loans. Eligible costs include:

• Salaries of employees, including social and health security payments;
• Rental costs, energy and water bills, fuel etc.;
• Unpaid invoices due to a decrease in business activity;
• Other commitments in respect of investment expenditures provided that they were contracted before the 2nd of April;
• Acquisition of material and stock for continuation of business, and
• Maintenance costs.

However, one should note that the CGS shall not cover restructuring or rescheduling of existing facilities.

Businesses already benefitting from state aid under other regimes (such as de minimis or GBER) can still avail themselves of state aid under the CGS.

Applying for the scheme

Loans will be made available from the commercial banks accredited by the MDB. Loan applications are assessed by the commercial banks in line with their credit policy criteria, in line with the standard process of securing bank financing. Furthermore, final approval rests with the commercial banks.

The list of accredited banks can be found here. This list will be updated regularly as new banks become accredited.

Furthermore, the MDB announced this morning that a agreement had been reached with BOV, with negotiations still ongoing with other local banks.

How we can help

The team at ARQ has been keeping up to date with economic measures as they are announced, and are ready to help you with any clarifications you might have or assistance required with applying for financing under the COVID-19 Guarantee Scheme. 

For further information, kindly do not hesitate to contact Veronica Nardelli on [email protected]  or Calvin Vella on [email protected].