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Financing aspects to consider

Financing aspects to consider

The Belgian federal government, the National Bank of Belgium (NBB) and the Belgian banking sector have agreed on a set of measures to support non-financial enterprises (as well as self-employed persons and private individuals) during the current COVID-19 crisis. For enterprises, the following measures shall apply: 

Deferral of payments

  • The financial sector offered an initial payment deferral until 31 October 2020. This has now been extended to 31 December 2020. The payment deferral could be requested until 20 September 2020 at the latest.
  • A company having obtained payment deferral under the initial rules, can apply for an extension until 31 December 2020 if the company still meets the conditions for obtaining the payment deferral at the time of the application for the extension.
  • The payment deferral applies to future payments of principal, but interests shall remain due and payable;
  • The maturity date of the financing shall be extended with the period of the payment deferral;
  • No further costs or charges shall apply in relation to the deferral of payments;
  • Eligible enterprises / organizations need to fulfill the following conditions:
    • The COVID-19 crisis has given rise to payment difficulties;
    • The enterprise / organization has a fixed presence in Belgium;
    • No payment arrears existed on 1 February 2020, or less than 30 days payment arrears existed on 29 February 2020 on commercial credits, taxes, or social security contributions;
    • No contractual defaults have arisen in the last 12 months prior to 31 January 2020 and there is no credit restructuring underway.
  • The deferral of payments does not apply to leasing or factoring arrangements;
  • Further guidance is available in specific charters published on the website of the Belgian banking sector federation Febelfin. 

Guarantee scheme

1. First regime: Credit < 1 year under State guarantee

  • The federal government has activated a guarantee scheme for new credits and credit facilities with a maximum term of 12 months which banks grant to viable non-financial enterprises, SMEs, self-employed persons and non-profit associations.
  • The guarantee scheme amounts to EUR 50 billion in aggregate;
  • All new credits and credit facilities with a maximum term of 12 months (other than through refinancing or non-utilized tranches), and credits with an undetermined duration which can be terminated on a discretionary basis, granted as from 1 April 2020 to (and including) 30 September 2020 will be included in the scheme. Important note: the State guarantee has been prolonged until 31 December 2020;
  • Initially, the credit could not exceed the estimated liquidity needs of the borrower for 18 months (for SMEs) or for 12 months (for non-SMEs), and could not exceed EUR 50 million at group level. The decree extending the State guarantee amended this modus of calculation of the maximum amount. The maximum amount of the credit is no longer determined by the declared liquidity needs of the borrower, but by the highest of three amounts: the liquidity requirement, twice the annual total labor cost and 25% of annual turnover;
  • The borrower must pay a fixed minimum fee to the bank, which in turn has to pay a fee to the State, according to the European State aid principles;
  • The guarantee scheme applies to all credit institutions under Belgian law and to all Belgian branches of foreign credit institutions;
  • Following the termination of the guarantee scheme, the losses incurred under the credits covered by the guarantee scheme will be examined. Any losses incurred will be divided between the financial sector and public finances as follows:
    • for the first tranche of losses (up to 3%), costs will be carried exclusively by the financial sector;
    • for the second tranche of losses (between 3% and 5%), costs will be split 50/50 between the financial sector and the State;
    • for the third tranche of losses (in excess of 5%), the State will carry 80%, whereas the financial sector will carry 20%;
  • The guarantee scheme does not affect other already existing guarantee schemes, but is intended to serve as additional support. However, the Federal State guarantee cannot be cumulated with the Flemish corona crisis guarantee; 
  • The guarantee scheme does not apply to factoring and leasing arrangements;
  • The guarantee scheme has been further elaborated in the Royal Decree of 14 April 2020. In addition, the NBB has provided further guidance.

2. Second regime: Credit > 1 year under State guarantee for non-financial SMEs

  • Non-financial SMEs can make use of this federal guarantee for SME loans with a term of more than 12 months to a maximum of 36 months, granted by banks from 24 July 2020 until 31 December 2020. The guarantee scheme could be extended for a maximum of 3 years;
  • EUR 10 billion of the existing EUR 50 billion will be used for this guarantee scheme for SMEs;
  • Unlike the first regime, this State guarantee for credits to SMEs is not compulsory but optional. Hence, the credit institution can decide itself whether or not it grants a credit that is subject to the State guarantee. The credit institution may allocate up to 20% of the assigned budget under the first State guarantee regime to the second guarantee regime;
  • The guaranteed principal amount of the credit is capped up to the highest of the following amounts: 
    • the (declared) liquidity needs of the borrower during a period of 18 months, excluding refinancing or making available non-utilized tranches;
    • double the total annual labor costs of the borrower;
    • 25% of the turnover of the last closed financial year of the borrower.
  • The borrower must pay a fixed minimum fee to the bank, which in turn pays a fee to the State, according to the European State aid principles; 
  • The guarantee scheme applies to SMEs set up under Belgian law or to branches with a permanent establishment in Belgium, set up by Belgian residents; 
  • Furthermore, the guaranteed credits must be used to the benefit of the Belgian activities of these SMEs. The credit agreement must exclude or limit foreign activities to 10% of the guaranteed credit loss;
  • The SMEs must fall within the European definition of SME; i.e. having a staff headcount of less than 10 (micro company), 50  (small company) or 250 (medium-sized company) persons, and respectively a turnover of less than EUR 2, 10 or 50 million or a balance sheet total of respectively EUR 2, 10 or 43 million;
  • The guarantee scheme applies to all credit institutions under Belgian law and to all Belgian branches of foreign credit institutions; 
  • The guarantee applies to individual credits, of which 80% of the loss will be borne by the State;
  • The guarantee scheme does not affect other already existing guarantee schemes, but is intended to serve as additional support. However, the Federal State guarantee cannot be cumulated with the Flemish corona crisis guarantee; 
  • The guarantee scheme does not apply to factoring and leasing arrangements;
  • The NBB has provided more guidance on the types of credits which fall within the scope of this guarantee scheme.

Lastly, it is worth mentioning that in addition to the above-mentioned framework put in place by the Belgian Federal government, Regional governments are also taking further initiatives, for example through the extension of existing guarantee schemes or through Regional State-funded loan schemes. The latter initiative includes, for example, the announcement of a new Flemish subordinated 3-year loan for viable SMEs financially affected by the COVID-19 crisis and a new Walloon loan up to EUR 200,000 to fund urgent working capital needs.

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