On 3 April, the Malta Development Bank (MDB) launched the MDB COVID-19 Guarantee Scheme. The purpose is of guaranteeing loans granted by commercial banks in Malta to meet new working capital requirements of businesses facing cashflow disruptions due to the COVID-19 pandemic. The Scheme has been approved by the European Commission under the Temporary Framework for State aid measures to support the economy. The Scheme will enable commercial banks, accredited by the MDB, to leverage the €350 million guarantee fund into €777.8 million in new working capital loans. Interested credit institutions need to submit an Expression of Interest to participate in the Scheme and eventually enter into a Risk Sharing Agreement and Service Level Agreement with MDB.

The eligible enterprises are small and medium-sized enterprises (SMEs) employing up to 250 employees and large enterprises employing more than 250 employees.

Hereunder are the loan features:

• Loan applications are assessed by the accredited commercial banks in line with their credit policy criteria. Final approval rests with the commercial banks.
  
  
• The maximum individual loan amounts is €2 million for SMEs and €5 million for large enterprises. Higher amounts require the prior ad-hoc approval of MDB and are to be capped at €4 million for SMEs and €8 million for large enterprises. However, in all cases, the loan amount shall not exceed double the annual wage bill of the beneficiary or 25% of total turnover of the beneficiary in 2019. Amounts higher than these limits are subject to appropriate justification and self-certification, to cover the liquidity needs of SMEs for the coming 18 months and of large enterprises for the coming 12 months.
  
  
• Commercial banks would need to give an interest rate reduction to beneficiaries of at least one percentage point on the average lending rate as compared to similar facilities prior to the introduction of the guarantee scheme.
  
  
• The term of the loans is between 18 and 48 months. The term can increase to 72 months, subject to additional terms and conditions.  
  
  
• A moratorium on both interest and capital repayments will be given for a minimum period of 6 months with the possibility to extend to one year on a case-by-case basis. 

Eligible costs under these loans mainly include, but are not limited to, salaries, leases, utilities, working capital creditor balances, creditor balances for investment expenditure contracted for before the approval of the Scheme, acquisition of material and stock, maintenance costs and expenses directly related to contracts which were cancelled or postponed because of the COVID-19 outbreak excluding penalties and other liabilities incurred due to non-performance of contracts. The Scheme shall not cover restructuring or rescheduling of existing facilities. 

Should you have any queries or wish to discuss further, please send an email to covid@kpmg.com.mt.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.