State AID Scheme Approved by Romanian State for SMEs in the Context of COVID-19 Outbreak

13 April 2020

The Romanian state has approved on 2 April 2020, through Government Emergency Ordinance 42/2020, a state aid scheme meant at supporting small and medium enterprises (“SMEs”) in the context of COVID-19 outbreak.

The scheme implements the measures provided within Government Emergency Ordinance 110/2017 regarding the Support program for small and medium-sized enterprises – IMM INVEST ROMANIA, as amended in the context of the pandemic crisis.

The scheme in amount of approximatively EUR 3,3 billion was notified to and approved by the European Commission under the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak.

1. Types of measures provided under the state aid scheme

 
The state aid measures consist in:

a)state guarantees for investment or working capital loans granted by credit institutions to SMEs;

b)grants for SMEs which have contracted investment or working capital loans guaranteed by the Romanian state under the scheme

1.1. Aid in the form of State guarantees

In what concerns state guarantees, SMEs may opt for:

a)one or more investment loans, and/or one or more working capital loans, guaranteed by the Romanian state in amount of maximum 80% of the value of the financing (excluding interest, fees and bank charges related to loan); in such a case, the maximum cumulated amount of loans guaranteed by the State is of RON 10,000,000, by also taking into account that the maximum value of working capital loans is of RON 5,000,000, while for investment loans is of RON 10,000,000, and/ or

b)one or more working capital loans for micro-enterprises and small-sized enterprises, guaranteed by the Romanian state in amount of maximum 90% of the value of the financing (excluding interest, fees and bank charges related to loan); in such a case, the maximum cumulated amount of loans guaranteed by the State is of RON 500,000 for a small-sized enterprise, respectively of RON 1,000,000 for a micro-enterprise;

In both cases, the actual value of financing which may be granted to a SME and guaranteed under this scheme is capped to any of the below, whichever represents the highest value:

a)double the amount representing the salary expenses, including the mandatory social contributions due by the SME related to salary income and incomes assimilated to salaries, recorded at the level of 2019; for SMEs established after 1 January 1 2019, the maximum amount of the loan cannot exceed the amount estimated for the first 2 years of activity; or

b)25% of the SME’s net turnover for 2019, respectively the gross income or the annual income norm for 2019 in the case of the natural persons who obtain income from independent activities, as the case may be; or

c)a value that results from its liquidity needs, and which may include both working capital costs and investment costs, provided that the beneficiary presents supporting documents, in which case the amount of the loan cannot exceed the liquidity needs from the time of granting for the next 18 months;

If cumulated, the maximum value of loans guaranteed by the Romanian state under the state aid scheme cannot exceed RON 10,000,000 and must also be cumulatively capped to the maximum value resulted as per the above criteria.

The maximum term of the financing is of 72 months for investment loans, respectively of 36 months for working capital loans. The term of the financing may be extended only in case of working capital loans, with a period of maximum 36 months. The term of the State guarantee cannot exceed 6 years.

1.2. Aid in the form of grants

SMEs which have contracted loans / credit lines guaranteed by the State under the state aid scheme, benefit from a grant represented by the cumulative value of the risk fee and the administration fee corresponding to the guarantee granted, and of the interest corresponding to the loans / lines of credit, but not more than the equivalent in lei of EUR 800,000 per SME.

2. Potential beneficiaries of state aid scheme

 
The state aid scheme is addressed to SMEs from all sectors, except for gambling and betting activities, production or sale of weapons, ammunition, explosives, tobacco, alcohol, substances under national control, narcotic and psychotropic plants, substances and preparations, as well as investigation and protection activities.

At the same time, special rules are established for SMEs active in the agriculture, fish farming and aquaculture sectors.

In order to benefit for the state aid scheme, SMEs must observe specific eligibility criteria, including submission of a written document whereby they undertake not to lay off existing personnel as of 4 April 2020 and until 31 December 2020.

3. Duration of the state aid scheme

 
Selection of beneficiaries and issuance of guaranties/ financing agreements can be performed until 31 December 2020, while payment of the grants can be performed until 31 March 2021 (this latter term being subject to possible extension).

4. Manager of state aid scheme. Estimated number of beneficiaries

 
Management of the state aid scheme is under the responsibility of National Fund for Guarantee of Credits for SMEs, which has the obligation to publish on its website the full text of the state aid scheme, the period during which applications can be registered, the annual budget, the date of the depletion of the annual / total budget of the scheme, as well as the form and content of the documents required to access it.

It is estimated that by implementing this scheme, state aid will be granted to a maximum of 40,000 beneficiaries.