Financial instruments under the Human Resources Development Programme 2021-2027
FMFIB EAD implements financial instruments through a Holding Fund with funds under the Human Resources Development Programme (HRDP) 2021-2027, co-financed by the European Social Fund Plus (ESF+).
The total amount of support from HRDP 2021-2027 is EUR 33.0 million, including EUR 22.17 million for financial instruments and EUR 10.83 million for grants in a single operation, in accordance with Article 58(5) of the Regulation (EU) 2021/1060.
The financial resources will be used to structure financial instruments (FI) in combination with grants in a single operation under two of the Program's priorities: Priority 1 "Promoting employment and skills development" and Priority 3 "Promoting youth employment."
The main objective of the FI is to facilitate access to financing that supports self-employment, the development of entrepreneurship, including youth and social entrepreneurship, with a focus on ensuring sustainable employment, especially for vulnerable groups as part of the labor market.
The funds will be invested through equity and debt financial instruments allocated indicatively as follows.
EUR 14.0 million (including EUR 3.66 million in grant funding) for equity FI in the form of equity and quasi-equity investments for business start-ups and entrepreneurial initiatives;
EUR 17.2 million (including EUR 6.85 million in grant funding) for debt financial instruments in the form of loans and/or guarantees;
The target final recipients (FR) are:
Start-ups, where at least 50% of the company's capital is owned by youths up to 29 years old, by persons from vulnerable groups (according to Additional Provisions, §1, item 4a of the Employment Promotion Act) or other start-up entrepreneurs who are natural persons with only one enterprise they own;
Start-up enterprises registered in Bulgaria, where at least 50% of the enterprise's capital is owned by Bulgarian citizens (including persons with dual citizenship) who have returned to Bulgaria from abroad within a period of up to 3 years prior to applying for FI funding; by third-country nationals who have been granted asylum or international protection or temporary protection; foreign citizens with a long-term or permanent residence permit and others, depending on the rights acquired under the Employment Promotion Act and with the right to access the labor market under the Labor Migration and Labor Mobility Act;
Start-ups in the social and solidarity economy (in accordance with Article 5 of the Law on Social and Solidarity Economy Enterprises), registered in Bulgaria no more than 5 years prior to the date of application for financing;
Microenterprises, including start-ups, that will hire people from vulnerable groups or have hired people from such groups in the year before the date of application for FI;
Social and solidarity economy enterprises that will hire people from vulnerable groups or have hired people from such groups, regardless of the period of enterprises` registration;
Young people of up to 29 years old (natural persons) – for financing of trainings outside the framework of formal education (including university education for obtaining an educational degree). Funding for training outside the framework of formal education is only eligible for debt FI.
The following financial products are planned to be implemented within the framework of the Holding Fund under the HRD 2021-2027:
Accelerator/Alternative Investment Fund – through equity and quasi-equity investments, the aim is to improve access to finance for enterprises in the early stages of development, support entrepreneurial skills and self-employment for eligible final recipients. Natural persons from these target groups must be directly involved in the management of the start-up enterprise.
The funds amounting to EUR 15.0 million, combined with grants in a single operation of up to 25% of the total amount of financing, are under Priority 1 and Priority 3 of the Program.
Grants are provided in the form of technical support (mentoring, training and access to a network of business partners and investors, coverage of product/service validation costs, accounting and legal services, etc.) - max. 10% of the total amount of support for final recipients and/or capital grant/capital relief/convertible grant, depending on the specifics of the enterprise.
It is expected that minimum 1% of the total capital managed by AIF under HRDP will be attracted by independent private investors.
No participation by final recipients is expected.
The maximum investment amount per final recipient is EUR 150 000. The eligible investment projects for financing should be in accordance with Article 58(2) of Regulation (EU) 2021/1060, should comply with the rules and restrictions of the applicable minimum/state aid regime and shouldn’t be physically completed or fully implemented at the date of the investment decision.
The expected amount of investments is EUR 12.38 million, including equity investments and grants.
Expected leverage – 0.80.
The debt financial instrument aims to provide easier access to financing under preferential credit terms for the target recipients.
Combined support with grants in a single operation can be utilized in the form of capital relief and amounts up to 40% of the investment and working capital financing.
Start-ups that use FIs within the first year of their registration could receive grants in the form of technical assistance (mentoring, training, provision of business partners, management, accounting and legal services, etc.). The amount of the grant is up to 5% of the loan value and should be aimed at the sustainable development of the start-up business. The financial intermediaries may provide such support.
The following components are planned:
Risk-sharing microcredits – financing in the form of short-term or long-term loans in combination with grants in a single operation. The financing could be used for investments in tangible and intangible assets, working capital necessary for the main activity or for expanding the entrepreneur's activity, and financing training outside the framework of formal education for young people up to 29 years old.
Loan terms:
Up to EUR 25 000 for training young people and up to EUR 50 000 for start-ups, social and solidarity economy enterprises, including newly established and microenterprises.
Repayment period with the possibility of a grace period for the principal amount – up to 120 months for loans for fixed tangible and intangible assets, 60 months for loans for working capital, for training loans - up to 48 months after the expiry of the 12 months of grace period.
No own contribution from the final recipients is envisaged, but the financial intermediaries may require such in accordance with its internal rules (except for loans aimed at training for young people).
Under HRDP 2021-2027 will be financed 100% of the loans for training young people up to 29 years old as well as up to 90% for the rest type of loans. These financial contributions as well as the favorable interest rates aim to achieve favorable conditions for the target recipients' groups under HRDP. The public funds from the Program are provided at 0% interest and without additional fees and commissions while the interest rate for the financial intermediary`s part is determined at market levels
Guarantee instrument – the debt instrument guarantees a portfolio of new loans, and covers up to 80% of the credit risk for each financing provided to final recipients:
for a portfolio guarantee with a capped loss ceiling at portfolio level of up to 25%;
for individual guarantees without a cap on losses. This type of guarantee refers to loans for training young people up to 29 years old, outside the framework of formal education.
The financial intermediary is expected to create a portfolio of new eligible loans, which are partially guaranteed by the program's contribution for each loan up to a certain amount (limited amount).
Loan terms:
The maximum amount of each loan is EUR 50 000 (EUR 25 000 for youth training).
Repayment period with the possibility of a grace period for the principal amount – up to 120 months for loans for fixed tangible and intangible assets, 60 months for loans for working capital, for training loans - up to 48 months after the expiry of the 12 months of grace period.
No own contribution from the final recipients is envisaged, but the financial intermediaries may require such in accordance with its internal rules (except for loans aimed at training for young people).
The financial advantage of the Program`s public contribution is transferred in full to the eligible final recipients by reducing the collateral required by the financial institution, reducing the interest rate, or other appropriate mechanism.
The component for financing young people’s training purposes envisages a combined support with grant in a single operation. The grant amounts to 40% of the loan and in case of presenting of a certificate of successful training`s completion, the grant could be in the form of capital relief.
Expected leverage for debt instruments – 0.73.
