The latest on financial support for Bulgarian companies affected by the pandemic

The European Commission recently approved the renewed guarantee programme of the Bulgarian Development Bank (BDB) in support of micro, small and medium companies affected by the COVID-19 pandemic. The guarantee instruments are also intended for the so-called "small companies with a medium market capitalization" (with up to 499 employees) from all sectors of the economy and are already being implemented by several commercial banks in Bulgaria.

The companies applying for support need to fulfil the following conditions:   

✓ to conduct their economic activity and be registered in the Republic of Bulgaria;   

✓ to be suffering unfavourable economic consequences from the pandemic;   

✓ to have completed at least 3 financial years with sales revenues whereby at least one of them has ended with a profit.

The renewed programme sets shorter approval deadlines and easier requirements for securing loans where the financing can be up to BGN 3 million, regardless of the size of the company, and whereby BDB will cover up to 80% of the loan principal under the conditions specified in the programme. The loan repayment period is of up to 7 years with the possibility of a grace period of up to 3 years.

As collateral, personal guarantees will be required from the beneficial owners, related parties or as an alternative - pledges of accounts receivables under the Obligations and Contracts Act, the Registered Pledges Act or through a financial collateral agreement under the Financial Collateral Contracts Act.

The applicants for financing will have faster access to information on whether they have been approved - up to 5 working days following the submission of all documents, while the collection of funds will be possible within 10 working days. The deadline for applying for the anti-crisis measure is 20 December 2021.

Meanwhile, the National Recovery and Resilience Plan (the Plan) has received favourable reactions from various industry organisations affected by it, including the Association of Bulgarian Banks (ABB). According to ABB, the Plan demonstrates the active role, which banks in Bulgaria will assume in the years to follow, to satisfy the demand of their clients for new investment, transformation, “green” and digital transition and business growth.

The Plan was drawn up in accordance with Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility (the Regulation). The latter was adopted to ensure a full recovery in the coming years and to prevent a scenario in which the current pandemic crisis would turn into a lasting cleavage between Member States. The Mechanism aims to address the economic and social damage stemming from the crisis, some of the structural problems faced by the economies of Member States, and to achieve faster green and digital transformation. In part, it is also based on long-standing discussions regarding the need for better tools to overcome economic crises in the European Union and the urgency to upgrade and optimise the architecture of the European Monetary Union, which Bulgaria is indirectly part of (as a member of the currency board, as well as in light of its adherence to the Exchange Rate Mechanism II in July 2020).

In accordance with the Regulation(1), Member States are required to draw up national recovery and resilience plans. These plans set out the reform and investment programme of the Member State concerned. Recovery and resilience plans which are eligible for funding under the Mechanism include reform measures and public investment through a comprehensive and coherent package, which may also consist of public schemes aimed at stimulating private investment.    

The scope of implementation of the Mechanism is structured in 6 pillars: environmental transition, digital transformation, smart growth, social and territorial cohesion, institutional sustainability in healthcare and the economy, and policies towards the next generation, children and young people.   

(1) Article 17(1) of Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility