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Marko Janićijević

Senior Lawyer

28. 04. 2020.

SERBIA: Financial Support of the Republic of Serbia through Favourable Loans

The Government of the Republic of Serbia has published several regulations as part of incentive measures scheme, including financial support programme of granting loans to business entities for (i) maintenance of liquidity, allowing them to settle liabilities due to business partners, employees and the state, and (ii) for procurement of working capital. The Republic of Serbia has earmarked RSD 24,000,000,000.00 (ca. EUR 203 million) for the implementation of the Programme.

Applying for the loan

It is worth noting from the outset that a business entity may submit only one application under the Programme.

Applications are submitted to the Serbian Development Fund (hereinafter: Fund), until the Programme funds are used up, however not later than 10 December 2020. The Fund’s Board of Directors will decide about the applications by 31 December 2020 at the latest.

The loan application under this Programme is available to sole traders, micro-, small- and medium-sized business entities so classified in line with the Law on Accounting (RS Official Gazette No. 73/19) based on the most recently submitted financial statements, and subject to the following requirements:

1. Submission of official regular financial statements for the previous two years;

2. If net loss is reported in the official financial statements of a business entity for one of the previous two years, business profit must also be reported;

3. Business entity is not experiencing difficulties[1];

4. Bankruptcy proceedings have not been initiated against the entity, the entity is not subject to pre-pack reorganization procedure, and no pre-pack reorganization measures are put in place, the entity is not subject to reorganization procedure, and no reorganization measures are put in place, and the entity is not subject to financial restructuring or liquidation.

Commercial terms of loans

Loans for maintaining liquidity and procurement of working capital may be approved under the following terms:

  • repayment period is up to 36 months, which includes a grace period of up to 12 months, the total term of loan being up to 12 months grace period and up to 24 months repayment period;
  • interest rate is 1% per annum;
  • loans are approved and repaid in dinars;
  • minimum loan amount per loan beneficiary with affiliates is 1.000.000,- dinars for enterprises and 200.000,- dinars for sole traders, agricultural co-ops and other business entities registered in relevant registers;
  • maximum loan amount per loan beneficiary with affiliates is:

 

up to 10.000.000,- dinars for sole traders and micro entities
up to 40.000.000,- dinars for small entities
up to 120.000.000,- dinars for medium entities
  • loan repayment is in monthly instalments;
  • interest is accrued on the principal debt during the grace period;
  • the main requirement for the implementation of the loan is that the number of employees should not be reduced by more than 10% between 15 March and 3 months after the date of loan disbursement. The employees working for the beneficiary under a fixed-term agreement commenced prior to 15 March and terminating during the above period are excluded from this caveat.

Collaterals

Depending on the loan value, the loan beneficiaries will provide the following collaterals:

Loan value Loan beneficiaries
up to 1.000.000,- dinars
loan beneficiary’s bills of exchange and personal bills of exchange of the founder(s) (all founders),
up to 2.000.000,- dinars loan beneficiary’s bills of exchange, personal bills of exchange of the founder(s) (all founders), and a guarantee of a natural person with permanent employment contract
up to 10.000.000,- dinars loan beneficiary’s bills of exchange, personal bills of exchange of the founder(s) (all founders), and a guarantee of the affiliated legal entity
up to 25.000.000,- dinars loan beneficiary’s bills of exchange, personal bills of exchange of the founder(s) (all founders), and a guarantee of a creditworthy business entity which is not a legal entity affiliated with the loan beneficiary
above 25.000.000,- dinars loan beneficiary’s bills of exchange, pledge on equipment owned by the loan beneficiary or pledgor and/or first rank mortgage

For clients in the Fund’s portfolio with already established real/appropriate collaterals, the loans will be approved subject to a higher-ranking collateral. The collateral rules require that the value of the mortgaged immoveables and/or pledged equipment/movables be 1:1 in relation to the value of the approved loan.

If applicant’s founders are foreign citizens or business entities registered abroad, personal bills of the founders are not required.

Programme implementation

The Fund will be in charge of collecting and processing loan applications, concluding loan agreements with business entities, and controlling the intended use of loan.

The Ministry will successively transfer funds for the implementation of this programme to the Fund.

The Fund monitors and controls the earmarked use of loans.

The Fund’s Board of Directors will establish, in line with this Programme, detailed criteria and requirements for approving the loans to maintain liquidity. These criteria and requirements will come into effect once approved by the Government.

Please note several important requirements established by the Fund, but not specified in the Regulation:

  • for business entities, the amount of loan may not exceed 50% of the operating income made, as indicated in the latest financial report,
  • for lump-sum taxed entrepreneurs, the amount of loan may not exceed 50% of turnover with commercial banks in 2019,
  • the applicant for the loan must not have their account blocked for more than 30 days continuously in the previous year, or a total of 90 days with interruptions in the last year (this also applies to the guarantor and the affiliated legal entity providing collaterals),

 

The loan beneficiary is required to allow control and review of the documentation necessary for a comprehensive insight into the application and control of the intended use of loan, at any time from the application submission date until expiry of three years from the contract date.

We are at your disposal for any legal questions related to the application of the Regulation.


[1] A business entity is deemed to be experiencing difficulties: (1) in case of a business entity with limited liability for debts, if the amount of its share capital was reduced by more than 50%, while more than one quarter of the share capital was reduced over the past 12 months; (2) in case of a business entity with at least one person fully liable for debts, if the capital presented in financial statements was reduced by more than 50%, while more than one quarter of the capital was reduced over the past 12 months; (3) if it meets ciriteria for initiating bankruptcy procedure. A business entity is deemed to be experiencing difficulties even if no criteria listed here have been met if there are obvious indicators that the entity is experiencing difficulties, such as loss growth, revenue drop, inventories level increase, redundant capacities, reduced cash flow, debt rise, interest cost rise and reduction in or zero value of assets. (Art 2 Item 5 of the Regulation on Rules for Allocation of State Aid)


Source of Law:

Regulation Establishing Financial Support Programme for Business Entities to Maintain Liquidity and Working Capital in Aggravated Economic Circumstances Due To the COVID-19 Pandemic Caused by the SARS-COV-2 Virus. (RS Official Gazette nos. 54/2020 and 57/2020)

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