Member Article

Covid III is starting and you need to act fast!

At its meeting on 18 May 2020, the Government approved by Resolution No. 553 the Covid III guarantee program for self-employed persons and companies employing up to 500 employees. Immediately afterwards, the websites of Českomoravská záruční a rozvojová banka, a.s. ("ČMZRB") published the conditions of the program. Entrepreneurs can already start loan negotiations with a commercial bank involved in the program. According to the experience of previous Covid programs, it is necessary to act quickly.

The COVID III program differs fundamentally from its predecessors in that entrepreneurs no longer apply for a loan guarantee from ČMZRB, but negotiate only with a commercial bank involved in the program (being a bank that has a portfolio liability agreement with ČMZRB for theCOVID III Program). With this step, the government promises faster assistance to entrepreneurs and less administrative complexity. Komerční banka will perform the entire risk management of the loan applicant and assess the fulfillment of the conditions of the COVID III program. If it does not find any obstacles, it will provide the applicant with a loan, for which ČMRZB will guarantee the cooperating bank in the form of a cumulative guarantee for the portfolio of transactions of the final beneficiaries. These must be such final beneficiaries who are authorized to do business in the Czech Republic in at least one of the supported economic activities, the list of which is published here.

The aim of the COVID III program is to support entrepreneurs with up to 500 employees whose economic activities are limited due to the occurrence of coronavirus infection and related preventive measures, through guarantees for operating bank loans. ČMRZB offers entrepreneurs up to 90% of the principal of a guaranteed loan to entrepreneurs with up to 250 employees and up to 80% of the principal of a guaranteed loan for entrepreneurs from 250 to 500 employees. The maximum amount of the guaranteed loan may not exceed CZK 50 million, while the guarantee period is limited to a maximum of 3 years. Specific details are given in the program conditions.

The guaranteed loan can be used by entrepreneurs to cover operating expenses, such as wages, rents, energy payments, payments of supplier-customer invoices, acquisition of supplies, materials, etc. Expenses paid from the loan must be substantiated by accounting / tax documents for any subsequent inspections during inspections by ČMZRB, the Czech Republic, the Office for the Protection of Competition or the Commission. At the same time, as in the case of the COVID I, COVID II, COVID Prague programs, funds from the loan may not be spent on refinancing previously concluded contracts on other debt financing of the entrepreneur, i.e. in other words on paying repayments of previously provided e.g. loans or leasing.

Legally, unlike previous programs, this is not a guarantee provided under the aid scheme under the De minimis Regulation. Support under this program is provided under the Temporary Framework for State aid measures to support the economy in the current spread of coronavirus COVID 19 adopted on 19 March 2020 C (2020) 1863 and its amendment C (2020) 2215 adopted on 3 April 2020. The aid was notified in accordance with the Temporary Framework as compatible with the internal market pursuant to Article 107 (3) (b) of the EC Treaty and Article 108 (3) of the Treaty on the Functioning of the European Union.

150 billion Czech crowns are set aside for guarantees. The COVID Prague program was exhausted in 10 minutes. Its predecessors, the COVID I loan program and the COVID II guarantee program, were exhausted in a single day. Although, according to the government, the Covid III program counts on the support of up to 150,000 entrepreneurs, it is necessary to act quickly and not delay.