COVID Prague – what’s new in support in the form of guarantees

COVID Prague guarantees

Prague city council has approved a call to participate in the COVID Prague programme under Operational Programme Prague – Growth Pole of the Czech Republic. The call was announced on 20 April, with applications accepted starting on 21 April at 8 am, only to close again after less than 15 minutes, as capacities were depleted. The support was intended for entrepreneurs operating in the territory of Prague and was the first support open to Prague businesses, which explains the enormous response.

Within the COVID Prague programme, the Czech-Moravian Guarantee and Development Bank (ČMZRB) will provide guarantees for loans rendered by commercial banks and contributions to interest payments to small and medium-sized businesses based in Prague.

The total allocation has been set at CZK 600 million, and ČMZRB thus expects that loans of up to CZK 1.4 billion might be provided. The parameters of the guarantee are the same as for COVID II, i.e.:

• Businesses may obtain a guarantee for up to 80% of the commercial credit amount.
• The maximum amount of the credit covered by the guarantee is CZK 15 million.
• Guarantees will be provided for up to three years.
• Financial contributions towards interest payments will be limited to CZK 1 million.

The loan must be used to reimburse operating expenses such as wages, rent, utilities, settlement of suppliers’ invoices, pre-financing of receivables, or the acquisition of fixed assets, inventories and other low-value assets.

Please note that before filing an application, once the allocation is topped-up and the call reopened, it will be necessary to obtain a commercial bank’s confirmation of its commitment to grant a loan, similarly as under the COVID II programme. Therefore, if you are interested in COVID Prague, it is necessary to first contact your commercial bank and start loan negotiations.

COVID Plus guarantees

On 17 April 2020, the Senate passed a support programme in the form of guarantees for loans provided to export-oriented enterprises with more than 250 employees. The support shall be provided by the Export Guarantee and Insurance Corporation (EGAP) as the COVID Plus guarantee programme. The relevant act has already been signed by the president. More detailed information on granting the support will be provided in the governmental regulation expected soon.

COVID III guarantees

The Ministry of Finance has prepared a support programme in form of a portfolio guarantee. Credit and risk assessment under the programme will no longer be carried out by the ČMZRB, but directly by individual commercial banks, making the lending process substantially faster and more efficient compared to the COVID and COVID II programmes. The guarantees will be negotiated with ČMZRB directly by the respective commercial bank, and it will be up to them which loans they submit to ČMZRB to obtain a guarantee. An important change from the COVID and COVID II programmes is that guarantees under COVID III may also be obtained by large enterprises (up to 500 employees) and by businesses based in Prague.

The state guarantee shall amount to up to CZK 150 billion, meaning that new loans totalling CZK 600 billion are expected to be granted. The maximum loan amount supported by the guarantee is CZK 50 million, and it must be used for operational financing.

Guarantees will be provided in the following amount:

• 90% of the principal amount of the guaranteed loan for a small and medium-sized business with less than 250 employees; the maximum amount of the guarantee is thus CZK 45 million.
• 80% of the principal amount of the guaranteed loan for businesses with 250 to 500 employees; the maximum amount of the guarantee is CZK 40 million.

To ensure the commercial banks’ proper risk management, ČMZRB’s guarantees in favour of each specific bank shall be limited to 25% of their overall credit portfolio.

This form of support now awaits approval by the Chamber of Deputies.