INVEGA starts providing loans to Lithuanian businesses affected by the war. What do you need to know?
In order to help Lithuanian businesses affected by the war in Ukraine, the National Development Agency Investment and Business Guarantees (INVEGA) starts providing loans to finance working capital and investment projects under the incentive financial instrument of the Ministry of Economy and Innovation "Direct Loans to Business Entities Affected by the War". EUR 50 million of funds from the INVEGA fund have been earmarked for this measure. "The terms and conditions of the loan instruments stipulate that companies of all sizes that have suffered from Russia's military aggression in Ukraine and that lack funds for working capital or investment projects, and do not receive them in the traditional financing market, will be able to apply for these loans," says Kęstutis Motiejūnas, Chief Executive Officer of INVEGA.
The terms and conditions of the loan instruments stipulate that companies of all sizes that have suffered from Russia's military aggression in Ukraine and that lack funds for working capital or investment projects, and do not receive them in the traditional financing market, will be able to apply for these loans.
The head of INVEGA points out that this instrument is prepared in accordance with the state aid regime established by the European Commission's Communication from the Commission Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia, valid until the end of 2022, therefore the application to receive the loan can be submitted until 11 November. "However, we very much hope that the validity of the European Commission's Communication will be extended and we will have the opportunity to significantly extend the period of granting loans under this measure," says Motiejūnas.
The business will be considered affected by the crisis caused by the war, if the share of export or import with Ukraine and/or the share of import with Russia and/or Belarus is at least 25% of the total share of the company's import or export (including with EU countries) from 1 January 2021 to 31 December 2021, or natural gas, heat and electricity costs make up at least 8% of the company's annual costs (according to the data of 2021). A business will also be considered affected if, as of 1 January 2022, one of its economic activities is among the most affected sectors, which are listed in Annex I of the European Commission's Communication. The head of INVEGA points out that it will also be assessed whether the company does not have or has terminated economic ties with Russian and/or Belarusian businesses no later than by 31 August 2022.
According to Motiejūnas, loans to finance working capital will be provided for a period of no longer than 3 years, and in the case of investment loans – for a period of no longer than 6 years. An investment loan will be available to those business entities who wish to purchase and/or finance their own tangible non-current assets (e.g. buildings, facilities, including reconstruction), purchase land (if the investment will be directly related to the production of planned products or goods or services provision) or to acquire intangible non-current assets (e.g. patents, licences or other intellectual property).
One borrower or group of companies (if the company belongs to a group of companies) may be granted only one working capital loan and only one investment loan. The amount of the granted loan cannot exceed EUR 10 million, and the amount of the granted loan cannot be increased. The maximum possible loan amount will be calculated in accordance with the following provisions established in the interim communication: the loan amount must not exceed 15% of the borrower's average sales revenue of the last 3 financial years, or the loan amount must not exceed 50% of the borrower's energy costs incurred in the last 12 months prior to the month of submitting the loan application.
It is important to mention that the amount of the investment loan provided by INVEGA cannot exceed 80% of the costs of the investment project (the amount shall be calculated excl. VAT, except in cases where the borrower is a non-VAT payer). The remaining part will have to be made up of funds from a private funder, of which at least 10% of the value of the investment project will have to be made up of the borrower's own funds.
Loan funds cannot be used for settlements with businesses registered in Russia, Belarus and China.
Loan funds cannot be used for settlements with businesses registered in Russia, Belarus and China. The funds of the granted working capital loans cannot be used to finance or refinance existing financial obligations in financial institutions, as well as to pay dividends, to reduce the authorised capital. And in the case of investment loans – for expenses not related to the investment project. When applying for a loan, the business will have to justify the need for the loan, and in the case of an investment loan, the economic viability and profitability of the investment project.
Loans will be provided at a fixed annual interest rate, which depends on the company's risk level, but in any case, the amount of the applied annual interest rate cannot be lower than 5%. "This amount of interest is very close to the price of money applied in the market, but this is what was quickly agreed upon with the European Commission. We have submitted proposals to the Ministry of Economy and Innovation to adjust some loan conditions, including applying more business-friendly loan interest rates. We hope that the ministry will be able to promptly coordinate the improved conditions of the measure with the European Commission", says Motiejūnas.
Applications for loans can be submitted to INVEGA through the application system.