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The Cabinet of Ministers Defined a Mechanism for Providing State Guarantees to Support Micro, Small and Medium-sized Enterprises

On November 25, 2020, the Government adopted a resolution "On some issues of providing state guarantees on a portfolio basis in 2020", developed by the Ministry of Finance of Ukraine.

The adopted resolution defines the mechanism for the provision of state guarantees by the Cabinet of Ministers of Ukraine to secure partial fulfillment of debt obligations on the portfolio of loans of creditor banks, provided to business entities of micro, small and / or medium enterprises.

In addition, the resolution establishes the procedure for selecting banks that will be entitled to receive such guarantees, and the conditions for providing state guarantees on a portfolio basis.

In particular, based on the results of the selection of banks wishing to participate in the program, the Government with its decision will determine the creditor banks and the limits of state guarantees for each such creditor. Based on these decisions, a contract is concluded with creditor banks to provide a state guarantee on a portfolio basis for up to 5 years (the state guarantee provides up to 50% of debt obligations on the loan portfolio and up to 70% on each loan), and creditors form a loans portfolio.

The creditor banks may be banks that:

  • prepare reports in accordance with international standards;
  • not classified as problematic and / or insolvent;
  • do not have overdue debts to the state budget;
  • comply with the requirements set by the NBU for forming and storing reserves, and have a working hryvnia loan portfolio of micro, small and medium business clients of not less than UAH 500 million.

The loan portfolio, which may be partially secured by government guarantees, may include loans that:

  • are provided to micro, small and medium-sized enterprises whose term of business activity exceeds 1 year and which are not bankrupt and / or bankruptcy proceedings have not been initiated against them;
  • are provided to finance the investment project, investment objectives, as well as to refinance debt on other loans (including loans under the program "5-7-9");
  • provided in UAH for a period of 1 to 10 years in the amount of not more than UAH 100 million at a rate not exceeding UIRD + 6%; and provided additional collateral by borrowers in the amount of not more than 60% of the loan amount, taking into account the liquidity ratios of the NBU;
  • are provided for activities not prohibited by law.

The government decision also designated Ukreximbank JSC as a guarantor's agent, whose powers include checking the correctness of received from banks documents, evaluation and monitoring of the loan portfolio, etc.

Also, the resolution amends the Procedure for providing financial state support to micro and small businesses, approved by resolution of the Cabinet of Ministers of Ukraine, dated January 24, 2020 № 28, in terms of the possibility of combining interest rate compensation, provided under this procedure, with the provision of state guarantees on a portfolio basis.

State guarantees on a portfolio basis will be provided in the amount, specified by the Law of Ukraine "On the State Budget of Ukraine for 2020" (UAH 5 billion).