Romanian support Program for small and medium-sized Enterprises (SME)

published on 20 May 2020 | reading time approx. 3 minutes

According to the Romanian legislation, the small and medium-sized enterprises are classified, based on the average annual number of employees and the annual net turnover or total assets they hold, in the following categories:

a) micro-enterprises – have up to 9 employees and realize a net annual turnover or have total assets of up to 2 million euros, equivalent in lei;

b) small enterprises – have between 10 and 49 employees and realize a net annual turnover or have total assets of up to 10 million euros, equivalent in lei;

c) medium-sized enterprises – have between 50 and 249 employees and realize an annual net turnover of up to 50 million euros, equivalent in lei, or have total assets that do not exceed the equivalent in lei of 43 million euros.

Almost 40,000 Romanian SMEs would have access to bank loans under preferential conditions to ensure the continuity of the activity and pay the staff employed during the pandemic period, until 31 December, 2020. Romania has obtained the European Commission's approval for two temporary state aid schemes:

• A. State guarantees for loans granted for working and investment capital;

• B. Direct grants to cover interest and fees generated by these loans.

Who are the eligible beneficiaries?

State aid may be granted under these two schemes to SMEs in all sectors except:

• gambling and betting industries,
• the production or marketing of arms, ammunition, explosives,
• tobacco, alcohol, nationally controlled substances, plants, drugs and psychotropic substances and preparations.

The enterprises should fulfill the eligibility criteria below:

• Have not been in financial difficulty at 31 December, 2019 within the meaning of
• Regulation (EU) no. 651/2014, but who have experienced financial difficulties due to COVID-19 pandemic;
• Are not in a dispute, as a defendant, against the Romanian Ministry of Public Finance or the credit institution granting the loan;
• Do not have overdue loans in the last 6 months prior to 31 December, 2019 or, if they register overdue amounts, they are included in categories A-C of the Central Credit Risk Center database, including leasing operations;
• There is no prohibition against them in respect of the issuance of checks/promissory notes;
• Insolvency proceedings have not been opened against them;
• They have to present the collateral required and meet all eligibility criteria imposed by the financial institution granting the loan;
• They are required not to have outstanding fiscal liabilities to the central budget or, if they register such outstanding liabilities, they have to commit to pay them out of the credit granted under the program;
• They have to submit a written document by which they assume the responsibility of not laying off existing employees starting the period in which the emergency ordinance came into force until 31 December, 2020, with the clarification that the company may organize the working hours of employees in line with the development of its current business activity.

The small and middle-sized companies would be able to access loans in value between RON 500,000 and RON 10,000,000 with an interest subsidized by the state over a period of maximum 72 months. Bank risk commissions would be also applicable.

A. State guarantees for bank loans

The State might provide guarantees of up to 80 percent of the amount of financing to enterprises (excluding interest, commissions and related bank charges). For micro or small enterprises, the state guarantee can reach 90 percent of the credit value.

The maximum cumulative amount of the state guaranteed financing that can be granted to a single beneficiary is RON 10,000,000 or less, with the following mention:

• In case of working capital loans, the maximum amount financed might be RON 5,000,000,
• In case of investment credits, the maximum funded amount might be RON 10,000,000.

Such thresholds are not equivalent to the amount actually borrowed. Thus, an eligible beneficiary would actually be able to access a credit equal to the higher of:

• Double the amount of wage costs, including compulsory social contributions recorded at year 2019 level. In case of SMEs set-up after 1 January, 2019, the maximum amount of the loan may not exceed the estimated amount for the first two years of activity;
• 25 percent of the beneficiary’s net turnover in 2019,
• An amount resulting from its liquidity needs, case in which the amount of the loan cannot exceed the liquidity needs from the time of granting till the next 18 months.

The methodological norms (approved by Government Decision No 282/2020) regulate the manner and conditions for the granting, monitoring and settlement of claims for the payment of state guarantees and direct grants. It is provided that the loans should have a 3-month ROBOR interest rate plus a fixed margin, differentiated as follows:

• for investment loans, the margin is of maximum 2 percent/p.a.;
• for loans / lines of credit granted for finance the working capital the margin is of maximum 2.5 percent/p.a.

The margin would also include the total level of fees charged by the credit institution at all stages of lending. The margin does not include the administration fee, the risk fee, as well as charges related to lending activities (e.g. notarial fees, valuation costs and collateral registration, etc.).

The maximum maturity for these state aids is of 72 months for investment loans, without any extension. In case of loans / lines of credit for working capital, the maximum maturity is of 36 months, with the possibility of extension.

B. Direct grants

Another support measure for all the above-mentioned categories of financing consists in the state subsidization of interest and risk and management fees related to loans and lines of credit for the financing of the working capital (for all categories of SMEs) / investment capital (the latter is not applicable for financing of micro and small enterprises), at a value of 100 percent.

The period of interest subsidy and the two types of fees cover the period between the date of granting of the credit until 31 December, 2020, but this measure is conditional on the annual approval of the grant by a separate regulatory act. The period during which the grant might be paid is computed from the date of entry into force of the provisions of the Emergency Ordinance 42/2020 until 31 March, 2021, inclusively, with the possibility of extension.

Thus, SMEs that have been granted loans guaranteed under the program benefit from a grant up to the sum of the amounts of the risk commission, the administration fee and the interest on the financing provided, but not more than the RON equivalent of EUR 800,000 per enterprise (excluding enterprises in the agriculture, fisheries and aquaculture sectors, where the limitations are between EUR 100,000 – 120,000).

Practical aspects

SMEs have massively call in for the “IMM Invest” program to get working or investment capital during this difficult financial period. As of 5th May 2020, the National SME Credit Guarantee Fund analyzed more than 47,000 applications received from more than 37,000 SMEs registered in the SME “imminvest.ro” platform and sent more than 20,000 applications for financing to the 22 partner banks.