Serbia continues to guarantee small business loans

The value of the guarantee of 500 million euros has been announced according to the old guarantee scheme and even more according to the new one, where the state will take a higher risk.
This year, the state will continue to guarantee loans taken by entrepreneurs, micro, small and medium enterprises for liquidity and working capital with commercial banks. One billion euros of state money is planned for that purpose, and this is not about the guarantees of the American DFC, which should amount to one billion dollars.
As announced by the President of the state, Aleksandar Vucic, it is planned to provide an additional 500 million euros for the existing guarantee scheme, and even more through the new guarantee scheme, with the state taking on a higher risk.
“We want to further strengthen the private sector. We need that growth, so we take vaccines, in order to save people’s lives and to be able to grow,” said Aleksandar Vucic a few days ago.
On that occasion, Bojan Stanic, Assistant Director of the Sector for Strategic Analysis of the Serbian Chamber of Commerce (SCC), said that the continuation of the guarantee scheme would additionally provide loans under relatively favorable conditions for maintaining liquidity until the economic recovery begins. Under last year’s guarantee scheme, the state gave guarantees of two billion euros, of which 1.58 billion were used. The loans were taken by 23,000 companies.
In last year’s aid package, the state guaranteed for 80 percent of the value of the loan, so not for the entire amount, so now it is expected to guarantee maybe for all 100 percent of the value of the loan. Last year, the guarantee was limited so that banks would not relax too much in risk assessment, which would mean giving money to those who cannot return it. There would be no loss for them, because everything would be compensated by the state. This is how the risk is divided. This is further strengthened by the fact that the maximum amount of the guarantee at the level of the insured portfolio of the bank is set at 480 million euros.
Also, in order to further stimulate economic activity, the condition is prescribed that at least 50 percent of the loans covered by the guarantee scheme must be new loans, while a maximum of 50 percent of the guarantee scheme could be used to refinance existing liabilities.
Nebojsa Atanackovic, honorary president of the Union of Employers of Serbia, reminds that the guarantee for loans is not cash that flows from the budget, but banks still approve their funds.
“That is good news and I expect that the National Bank will soon give instructions to commercial banks on how much the state guarantee increases. I hope that the banks will loosen the conditions, that they will not be restrictive in terms of collateral and support those activities that were not before. The very fact that out of two billion euros, not everything has been used, but three quarters, shows that the conditions should be milder. Many sectors such as transport, tourism and catering could not obtain these loans. Banks should appreciate not only their current decline in income, but also their market position. Because, when the situation normalizes, they will be able to repay the loan,” says Atanackovic.
Loans could be approved in dinars or euros, and the maximum interest rate in the case of dinar loans was one-month belibor increased by 2.5 percent, while for euro-indexed loans, three-month Euribor was calculated, increased by three percent. Due to the fall in the reference interest rates of the European Central Bank and the domestic central bank, the interest rate for loans to the economy is practically equal and amounts to just under three percent per year.
Last year, the loans were approved for a repayment period of three years, with a grace period of nine to 12 months. Entrepreneurs could get a maximum loan in the equivalent of 25 percent of income from 2019, or three million euros in euros or dinars. Businessmen who took guaranteed loans were not allowed to pay dividends or to repay loans for the same purpose prematurely during the grace period, Politika reports.