How the €1bn Cyprus Government Guarantee Scheme works

The Cyprus Government Guarantee Scheme will offer low-interest loans to businesses of all sizes via Cyprus banks.

It will become available with the enactment of the Amending Law “On the Issuance of Government Guarantees to Credit Institutions for the Granting of Loans to Businesses and Self-Employed Employees Law of 2021” by the House of Representatives and its issuance decree by the Minister of Finance.

The €1 billion Scheme for the provision of support to businesses and the self-employed in the context of the outbreak of Covid -19, which was approved by the European Commission on August 17, 2021, and which was approved by the Ministry of Finance on Thursday will operate as follows.

According to a statement by the ministry of finance, the purpose of the Scheme is to provide government guarantees totaling up to €1 billion to credit institutions operating in the Republic with a view to granting new low-cost loans to businesses and self-employed persons. This is part of the Commission’s effort to provide support to Member State economies during the current outbreak of Covid-19 .

Loans must be approved by the credit Institutions by 31/12/2021, according to the statement.

The proposed bill provides for the distribution of government guarantees as follows:

€300 million are provided for the issuance of loans to self-employed and very small enterprises;  €550 million for the issuance of loans to small, medium-sized and large enterprises and  €150 million for the issuance of loans to large Enterprises.

Government guarantees and state support are provided to increase liquidity in the economy by a corresponding amount. More specifically, the provision of government guarantees amounting to €1 billion  will offer an increase in liquidity in the economy of about €1.43 million.

Government guarantees will not be used to repay existing credit facilities either serviced or non-serviced or existing credit facilities during the restructuring of any credit institution.

In addition, the statement notes that the basic principles of the granting of government guarantees are covered by the law, while the various parameters and conditions of the granting and use of government guarantees will be issued by decree of the Minister of Finance.

Government guarantees will cover 70 per cent of the losses that may arise from the above loans and credit insitutions will have to cover the remaining 30 per cent, regardless of whether the loan is secured or not.

The loans will have terms of 3 months to 6 years excluding current accounts whose maximum duration will be 1 year.

The statement adds that the issuance of current accounts and / or loans without any collateral may not exceed 50 per cent of the amount issued to the self-employed and to very small businesses, nor 30 per cent  to the small and medium-sized  businesses nor 20 per cent to large businesses.