Subsidized interest rates scheme on business loans rolled out

Source: Times of Malta

Date: 16/04/2020

By: Keth Micallef

Shutterstock

Businesses and self-employed works hit hard by the coronavirus pandemic are being offered a subsidy of up to 2.5 per cent on the interest rate charged by banks, should they decided to take a loan to cover expenses.

Under this scheme, which is estimated to cost €20 million per year, applicants would benefit from a subsidised interest rate for the first two-years of the loan. The bank’s normal loan eligibility criteria still apply.

Details were announced in a news conference by Finance Minister Edward Scicluna and Parliamentary Secretary Clayton Bartolo.

It is a collaboration with the Malta Development Bank, and is being offered by Bank of Valletta, HSBC, APS, BNF Bank, MeDirect, Lombard Bank, Isola Bank and FCM Bank.

Moratorium on loans, guarantee scheme

The subsidy should be taken in the context of other measures announced recently, such as the six-month moratorium issued by the Central Bank of Malta on all loans, the ministers said.

Scicluna said the moratorium covered around €11 billion of which €5 billion comprised property mortgages. This payment holiday, covering capital and interest payments, was being offered to SMEs, self-employed and individuals whose income had dropped as a result of the COVID-19 outbreak.

Those interested must apply by June 30, but each case would be treated on its own merits. However, those who were already defaulting on their payments before March 1 of this year will not be eligible.

The finance minister added that interest rates on loans were also being lowered by another government measure – the COVID-19 bank guarantee scheme offered by the MDB. This is aimed at businesses seeking a loan to cover expenses including employees’ salaries, supplies and rent costs who lack the necessary guarantee.  In this case the government is offering up to 90 per cent of the required guarantee.

Excise duty on alcohol to be lifted to aid sanitizer production

It was also announced that excise duty on alcohol was being lifted to encourage higher production of sanitizers by local companies manufacturing this crucial product in the fight against the pandemic.

Scicluna added that government was already preparing for the economic recovery, but this did not necessarily mean that it had any clear indication of when this would be happening.

Malta can afford 7 per cent increase in deficit

Commenting on the impact which this outbreak could have on government’s finances Scicluna said a deficit was being expected, but avoiding a total lockdown was crucial.

However, given the health state of the public finances, government could afford up to a 7 per cent increase, which would mean that the overall debts would increase to 50 per cent of Malta’s GDP.

Scicluna also defended government’s approach to rolling out the aid packages in a staggered manner, saying certain countries which had taken a very generous approach were trying to backtrack.

Social partners welcome the scheme

The Malta Chamber SMEs (GRTU) welcomed the interest rate subsidy scheme saying it would make the guarantee scheme accessible to a wider number of businesses.

While hailing the measure as an important tool to support SMEs survive these turbulent times and give them a good platform economic recovery, the GRTU urged banks not to charge any interest rate above the 2.5 percent government subsidy.

It also emphasized on the importance of processing loan applications swiftly in view of the cash flow problems brought about by the pandemic.

In a separate statement the Chamber of Commerce, Enterprise and Industry hailed the move as a step in the right direction.

The Gozo Business Chamber and the Gozo Tourism Association also expressed satisfaction that the government had taken their proposal on board, which they said would help businesses weather the storm. 

Tags: