The Fund Manager of Financial Instruments in Bulgaria (Fund of Funds, FoF) has designed and is ready to launch a new guarantee instrument in support of small and medium-sized enterprises affected by the economic crises triggered by the COVID-19 pandemic. Today, the FoF launched a procedure for the selection of partner banks for the purpose of its implementation.
Through the new product Loss-capped portfolio guarantee to overcome the effects of the COVID-19 crisis the FoF will assume part of the credit risk of financial institutions in extending new loans to small and medium-sized enterprises in the case of insufficient collateral that need support due to the current economic constraints. The goal is to facilitate the access of businesses to loans that will enable their continued operation, including to meet their liquidity demand and/or overcome financial difficulties resulting from or compounded by the pandemic.
The FoF offers a guarantee for up to 80 % of each loan against which the respective bank will undertake to offer financing at a preferential interest rate and lower requirements for the securities to be provided by applicants. In terms of structure, the product will combine a guarantee instrument and an interest subsidy for enterprises encountering liquidity difficulties but willing to retain their staff.
The parameters of the guarantee product have been structured after careful tracking and detailed analysis of market dynamics to ensure that they are aligned to the fullest extent to actual business needs without exposing financial institutions to excessive risk.
From today until 6:00 p.m. on 17 July 2020, all financial institutions with a valid banking and lending authorisation may submit applications in the call for the selection of partner banks for the implementation of the anti-crisis instrument of the Fund of Funds. The document package for the call has been published on the FoF website.
The instrument Loss-capped portfolio guarantee to overcome the effects of the COVID-19 crisis is financed by Operational Programme Innovation and Competitiveness (OPIC) 2014-2020 and has a total budget of nearly BGN 158 million.
The funds have been reallocated within the OPIC from funding initially available for guarantees under-investment loans. The crisis resulting from the COVID-19 pandemic has shifted priorities and brought the need for liquidity to the fore.
In order to ensure that the necessary funding is available to support small and medium-sized businesses, the FoF terminated the call for the selection of financial intermediaries for innovation and energy efficiency. The funding earmarked of nearly BGN 131 million will be reallocated to the new guarantee instrument. The amount will be supplemented by an additional BGN 27 million available under the Funding for small businesses financial instrument.
