The Council of Ministers has recently adopted Decision No. 277 dated 06.04.2020 (the “Decision”) regarding the state loan guarantee in the amount of ALL 11.000.000.000 (eleven billion Leke). This guarantee scheme provides lending to companies whose activity has been closed or their turnover is reduced because of measures taken due to COVID-19. Lending’s sole purpose is to cover employee’s salaries.
The Decision sets out the terms and conditions regarding State Loan Guarantee Agreement and the Memorandum of Understanding and it stipulates the allocated limits of the State Guarantee to the commercial banks, authorizing the Ministry of Finance and Economy to enter into such agreements and to perform any necessary actions in connection with the state loan guarantee.
The Decision designates two draft agreements, which will provide for the implementation of the State Loan Guarantee:
- Guarantee Agreement “On the approval of the state loan guarantee with commercial banks for business salaries, whose activity is affected by government decisions in the context of managing the situation created by COVID-19”,
- Memorandum of Understanding, the signing of which constitutes a condition for the qualification of the loan in the business guarantee scheme.
The Guarantee Agreement does not constitute a direct obligation to the state, but it is a possible obligation. The obligation will be direct in the event the businesses fail to pay in full or in part the guaranteed loan.
Regarding the guarantee, the Guarantee Agreement determines the amount to be allocated to the bank and in any event the maximum accumulated amount of loan’s disbursements shall not exceed the amount specified in the agreement. The Ministry of Finance and Economy guarantees 100% of the loan principal, however it does not, undertake the guarantee of interest or penalties arising from the loan.
The companies that may benefit from the scheme are those whose activity is affected because of COVID-19 and do not benefit from the provisions of the Decision of Council of Ministers no. 254, dated 27.03.2020. The purpose of using the loan funds is only the payment of employee’s salaries, based on February’s payroll.
In any case, the granting of the loan shall be carried out according to the internal policies of each bank as to the credit risk, nevertheless simplified procedures shall be provided.
The amount of the loan for each participating business shall not exceed 3 (three) gross monthly salaries of employees declared in accordance with the applicable tax legislation. Salaries higher than the monthly gross amount of ALL 150.000 (one hundred fifty thousand Leke) are excluded from being covered under such guarantee. The loan term may not exceed 2 (two) years.
Banks shall not apply administrative costs and shall offer a preferential interest rate. The loan currency shall be in Albanian Leke.
Businesses shall submit the request regarding loan application with a bank no later than 30 days from the date of signature of the State Guarantee Agreement between the Council of Ministers and the respective bank.
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