The Government of the Russian Federation has introduced a new instrument of state support for small and medium-sized businesses - an "umbrella" guarantee. Now even those entrepreneurs who previously could not count on concessional financing will be able to get a loan quickly and at a low interest rate
What is an "umbrella" guarantee?
In mid-September 2021, the Government of the Russian Federation announced the launch of a new program to support small and medium-sized businesses, which provides for an "umbrella" guarantee. The guarantor is the Corporation for the Development of Small and Medium Enterprises (hereinafter referred to as the Corporation). The "umbrella" mechanism will provide an opportunity to obtain borrowed funds for a whole segment of entrepreneurs in need of financing. According to the developers, such a guarantee mechanism has the following advantages:
Access to concessional financing will be given to entrepreneurs who previously did not meet the requirements of financial support and lending programs;
providing funds at reduced interest rates;
the speed of receiving funds;
the “one stop shop” principle: to receive money, it is enough to visit the office of a bank that is a partner of the program once (for example, Sberbank and VTB are currently participating in the program); the guarantee will also be issued there, there is no need to apply to the Corporation for this;
the commission for the guarantee is paid by the partner bank, not the guarantor.
Requirements for borrowers
In order to participate in the program and obtain a guarantee when obtaining a loan from a partner bank, a company must meet the mandatory requirements. They are spelled out in a document called “Regulations for the provision of guarantees by the Federal Corporation for the Development of Small and Medium-Sized Businesses Joint-Stock Company for the obligations of small and medium-sized businesses” (hereinafter referred to as the Regulations). Those who wish to take advantage of the new support measure are advised to first study this document, as well as the Rules for the interaction of banks with the Corporation when providing guarantees (hereinafter referred to as the Rules). These documents are posted on the Corporation's website in the "Financial Support/Umbrella Guarantee Mechanism" section. The borrower must meet the following requirements:
compliance with the provisions specified in Part 1 of Art. 4 of the Law on the development of small and medium-sized businesses;
being in the register of SMEs;
Support is not provided to enterprises in certain business areas, such as gambling and financial activities, insurance, etc.;
the procedure of reorganization, liquidation or bankruptcy should not be initiated;
The borrower did not violate the conditions and procedure for obtaining support by SMEs, which are provided for by the Law on the development of small and medium-sized businesses. Information about such violations is reflected in the register of SMEs;
No debt to a partner bank.
Terms of guarantee
To issue a guarantee, an agreement is concluded, the parties to which are the partner bank that issues loans to entrepreneurs, and the Corporation. A guarantee can be secured for loans issued for up to 180 months. The term of the guarantee is tied to the term of the loan extended by 120 days. In this case, the guarantee is provided only for 50% of the loan amount. The funds will be available to the borrower in the form of a one-time transfer, a revolving line of credit or an overdraft. It is important to consider that the Corporation can guarantee the borrower only when the loan is taken for the following purposes:
acquisition of fixed assets;
replenishment of working capital;
business development;
refinancing of a loan received from another bank for the above purposes.
The total amount of the Corporation's financial liability under a separate surety agreement cannot exceed RUB 1 billion. According to the provisions of the Regulations, the Corporation begins to answer for the debts of the borrower only after the expiration of 90 days from the date of delay in payment of the loan. However, payments in favor of a partner bank under a surety agreement will not relieve the borrower of property liability, i.e. The debt of the Corporation will have to be repaid in any case. Moreover, the Corporation is only responsible for the debt of the entrepreneur for the amount of the principal debt, the guarantee does not cover fines and other expenses accrued in connection with the delay.
According to the Regulations, banks cannot transfer their rights of claim under loan agreements to third parties without the prior consent of the Corporation. If the bank violates this condition, the new creditor will not become a party to the surety agreement.
The procedure for making payments in favor of a partner bank
For entrepreneurs, it may be of interest to regulate the procedure for making payments by the Corporation in favor of a partner bank under a guarantee agreement, because after transferring funds, the borrower will have to deal not with the bank, but with the Corporation. Thus, a partner bank has the right to apply to the Corporation with a corresponding request if:
the loan agreement is included in the register of loans secured by the Corporation's guarantee;
the borrower is more than 90 days past due on principal.
The Corporation has 30 calendar days to consider the bank's application for the Corporation's payment. After the transfer of funds to the bank, the Corporation receives its rights under the loan agreement, and then the entrepreneur will have to interact with the Corporation.
The new support measure facilitates business access to debt financing and allows entrepreneurs to count on more favorable credit conditions. But you need to remember that the program assumes that the borrower meets the established requirements. To assess your ability to use the new functionality, it is recommended to consult with a lawyer.
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