650 businesses benefit from €500 million under Covid Guarantee Scheme

Around 650 businesses - large and small - have benefited from over €500 million in bank loans guaranteed under the Malta Development Bank’s COVID-19 Guarantee Scheme (CGS), BusinessToday has leant.

MDB chairman Prof Josef Bonnici told this newspaper that the scheme was making available vital capital to businesses crippled by the pandemic.

“COVID-19 has severely disrupted the labour market, as many foreign workers left the country and numerous workers opting for early retirement,” he said.

“As the country starts to ease restriction measures, the challenge now - as in many countries abroad - is to see that this trend is reversed in as short time as possible.”

The MDB this week announced a further six-month extension to the scheme, after the European Commission adopted in November 2021 a limited prolongation of six months of the State aid Temporary Framework, until 30 June 2022.

This will allow EU member states, where needed, to extend their support schemes and ensure that businesses still affected by the crisis will not be cut off from necessary support.

To this end, the MDB wrote to the Commission to extend the Bank’s Covid-19 facilities in line with the amendments of the Temporary Framework and in its decision of 12 January 2022, the European Commission approved the requested prolongation of the MDB’s existing Covid-19 schemes until 30 June 2022.

In its latest notification, the MDB also asked the European Commission to alter some of the terms of the CGS loans, both new and existing, to provide for more flexibility where needed.

In its decision the European Commission approved that, in exceptional cases and at the discretion of the commercial banks, the loan term can be extended from six years to a maximum of eight years (inclusive of the moratorium period).

Bonnici said that many businesses were still sustaining considerable expenses, including rent, loan repayments, overheads and wages, while income had been severely affected by the pandemic.

He said that the objective of the MDB’s schemes is to preserve the continuity of economic activity during and after the COVID-19 outbreak, thus ensuring that undertakings impacted by the pandemic continue to have access to the necessary bank facilities to finance their working capital.

As these facilities will now continue running until end June 2022, businesses requiring such financing are encouraged to approach one of the nine accredited commercial banks intermediating the schemes.

Moreover, the extension is also applicable to MDB’s COVID-19 Interest Rate Subsidy Scheme, whereby applicants can still benefit from a grant of up to 2.5 percentage points on the interest payable on the CGS loans for the first two years of the term, Bonnici explained.

MDB’s intervention through the CGS was crucial in ensuring that Maltese businesses survive the severe liquidity constraints they were facing due to restrictions brought forward by the pandemic spread.

Launched in April 2020, MDB’s CGS is leveraging on a Government guarantee of €350 million by mobilising commercial banks’ liquidity into the flow of credit to the real economy.

Through the CGS, the MDB is providing a guarantee of 90% on new working capital loans granted by commercial banks and this capital relief is enabling the creation of a portfolio of up to €777.8 million in new working capital loans to all businesses, regardless of size or sector.

Eligible working capital costs under the CGS include wages, rental costs and utility bills, among others.