The criteria of the Sovereign Guarantee for the fashion sector are clarified. What will the state cover?

Loans for the fashion sector, including textile clothing and footwear manufacturers through the Sovereign Guarantee where 70% of the principal will be covered by the Ministry of Finance and Economy, will be offered at 5.2% interest.

In the Official Gazette, the decision "On the approval of the state loan guarantee with commercial banks to guarantee the borrowing of processing industry subjects, category NACE 2, for investments in technology and innovation, for the purchase of raw materials, as well as for the determination of the conditions and criteria of the guarantee agreement and the agreement of understanding".

The fund for the sovereign guarantee line is worth 4 billion ALL. While the repayment term is foreseen up to 7 years for loans for investment and up to 3 years for loans for the purchase of raw materials.

"The Lender must offer the Loan with a preferential annual interest rate, equal to: i. the average interest rate of the three most recent 12-month treasury bonds issued by the government of the Republic of Albania (reference/index); plus ii. a margin at a maximum level of 1.5%, depending on the term of the Loan and the product with which the Loan will be offered", the decision published in the Official Gazette is quoted.

In order to benefit from the loan, the fason enterprises must not have outstanding loans from previous sovereign guarantees.

The decision foresees that the instrument of the State Guarantee will be implemented through agreements that will be related to the 11 commercial banks operating in the banking system, where the businesses of the sector will have the opportunity until the end of October 2024 to apply to them for loans with facilitating conditions , while until the end of this year, the final deadline for concluding loan contracts has been set.

"The Borrower must submit the Loan application request to the Lender no later than October 31, 2024. Loan contracts must be signed no later than December 31, 2024," the decision states.

The purpose of using the Loan funds is to provide the Borrower with the necessary funds for investments in technology and innovation, as well as for the purchase of raw materials. The Lender shall provide that for any loan to be granted under this Guarantee Agreement, the portion of the loan for the purchase of raw material shall not exceed 30% of the value of the loan. The total amount of loans granted to borrowers from this agreement cannot exceed ALL 100 million.

This Guarantee Agreement shall enter into force upon signature by the parties and shall become effective upon disbursement of the Loan between the Lender and the Borrower.

For months, due to the fall of the euro currency and cost increases, the fashion sector is in a difficult situation, which has led to the closing of factories and the reduction of jobs.

Loan terms and conditions

1. The value of the Loan made available by the Lender to the Borrower may vary in accordance with the request presented by the Borrower, but in no case the total amount of loans granted to the Borrower by the banks, according to this Guarantee Agreement, will not be more higher than 100,000,000 (one hundred million) ALL.

2. The term of the Loan must be at the discretion of the Borrower, but in no case exceeding the term of 7 (seven) years, in the case of loans for investment and in no case exceeding the term of 3 (three) years in the case of loans for the purchase of raw materials.

3. The loan must be in the form of a bank loan product that contains a clear loan repayment schedule.

4. The Lender, based on the credit risk assessments for each Borrower, has the right to request or not additional collateral from the Borrower, but in no case the required amount of collateral, including the guaranteed value of the Loan, according to this Agreement, must not exceed the calculated coverage, according to the legislation and internal rules of the Lender.

5. In cases of prepayment of the Loan, the Lender must not apply a commission, penalty or any other measure related to the prepayment of the Loan.

6. The loan currency must be in the local currency (lek).

7. The lender must offer the Loan with a preferential annual interest rate, equal to: i. the average interest rate of the three most recent 12-month treasury bonds issued by the government of the Republic of Albania (reference/index); plus ii. a margin at a maximum level of 1.5%, depending on the term of the Loan and the product with which the Loan will be offered. The fees applicable to the borrowers for granting the loan must not be higher than the maximum level of 0.5% in total.

8. The lender will offer the loan with a grace period of not less than 9 months for investment loans and with a grace period of not less than 6 months for loans for the purchase of property seen.

9. The lender will offer the loan by applying penalties for late payments not higher than the penalties defined in the relevant standard conditions. The lender will not apply penalties for early repayment of the loan.

10. The terms and conditions of the Loan will be defined in the Loan Agreement, which will be signed between the Lender and the Borrower, in accordance with the content of this Agreement. The terms and conditions defined in the Loan Agreement, which contradict this Agreement, will be considered invalid to benefit from the State Guarantee and will not produce any effect against the MF.

11. No transfer of the Lender's rights or obligations arising from this Agreement or the Loan Agreement may be transferred to third parties without the prior written approval of the MF.

12. For any change, renewal or restructuring of the Loan Agreement, which can be made in the agreement between the Lender and the Borrower, within the term defined in point 2 of this article, the approval of the Ministry of Finance is not necessary, provided that these changes do not shall have no effect on the Lender's rights against MF, under the terms set forth in this Agreement. The Lender will notify AMGKP in writing of any change, renewal or restructuring of the Loan Agreement.

13. The Lender is responsible for the total amount of the Guaranteed Loan Value not to exceed the Guarantee Value issued by the MF in his favor, according to Article 2 of this Agreement. In no case, exceeding the Guarantee Value will not constitute an obligation for the MF.

14. The loan will be considered completed and will no longer be subject to this Agreement, only after it has been paid in full by the Borrower in accordance with the terms and conditions of the Loan Agreement. The lender must notify AMGKP in writing of all completed Loans within a period of 10 (ten) calendar days from the date of their completion.

15. The Lender must notify AMGKP in writing about the change of the borrower's administrator, in cases of sale, donation, transfer of the company's quotas, upon receiving the notification from the Borrower. The lender allows the borrower's obligation to send this notice to be included in the loan contract.

Borrower qualification criteria and criteria for obtaining the Loan

1. The Lender will provide Guaranteed Loans under this Agreement, only to Borrowers who meet the following criteria: a) The Borrower must be a subject, which develops its activity in the fields developed based on the NACE 2 classification according to definition in Annex 2 of this Agreement. b) The borrower must be a subject registered at the National Business Center, in accordance with law no. 9901, dated 14.4.2008, "On traders and commercial companies", amended and the law no. 9723, dated 3.5.2007, "On business registration", and the capital structure to be owned 100% by non-public entities. c) The borrower must not have unpaid tax obligations at the time of application. d) The borrower must not have problem loans, with delays of more than 60 days, in the history and at the present moment in the Register e) The borrower must not have obligations in the history and at the present moment to the Ministry of Finance that derive from the scheme previous state guarantees approved with: 1) VKM no. 277, dated 6.4.2020, "On the approval of the state loan guarantee with second-tier banks for the salaries of merchants or commercial companies, whose activity has been affected by the decisions of the Council of Ministers, in the framework of the management of the created situation from COVID-19, as well as for determining the terms and criteria of the Memorandum of Understanding

2) VKM no. 387, dated 13.5.2020, "On the approval of the state loan guarantee with commercial banks to guarantee the borrowing of merchants or commercial companies to enable the necessary financing for the recovery of commercial activity affected by the situation created by COVID-19, as also for determining the conditions and criteria of the Guarantee Agreement and the Memorandum of Understanding

3) VKM no. 349, dated 26.5.2022, "On the approval of the state loan guarantee with commercial banks to guarantee the borrowing of entities that wholesale basic food products to enable the necessary financing for keeping reserves, in order to cope with the special situation of created in the market, as well as for determining the conditions and criteria of the Guarantee Agreement and the Memorandum of Understanding". The Borrower submits the self-declaration form for this purpose to the Lender.

2. The purpose of using the Loan funds is to provide the Borrower with the necessary funds for investments in technology and innovation, as well as for the purchase of raw materials. The Lender shall provide that for each loan to be granted under this Guarantee Agreement, the portion of the loan for the purchase of raw material shall not exceed 30% of the loan value.