Romania’s state aid scheme for supporting SMEs and entrepreneurs in the context of the economic crisis generated by the COVID-19 pandemic (the “Scheme”)

The state aid scheme IMM Invest Romania, initially approved under the Governmental Emergency Ordinance 110/2017 on the Program for supporting small and medium-sized enterprises - IMM INVEST ROMANIA, has been enhanced to address the economic crisis generated by the COVID-19 pandemic.

Under the Scheme, qualifying beneficiaries may access loans of up to RON 10 million (approximately €2 million) with the Romanian state guaranteeing the principal – 80% for medium enterprises and 90% for micro and small enterprises, and subsidizing interest and certain fees, including security agency fees.

The estimated budget of the grant for subsidies is RON 781 million (approx. €161 million), while the maximum amount for state guarantees is estimated at €3.1 billion – these would enable approximately 40,000 entities to access the Scheme.

The scheme was approved by the European Commission on April 13, 2020.

Who can benefit under the Scheme?

Entities operating in all sectors of economy, with few exceptions¹, can access the Scheme if they:

(a) Are companies, entrepreneurs, freelancers and family enterprises, cooperatives and startups, in each case qualifying as SMEs;

(b) Are not in difficulty, as per the EU Commission’s regulations;

(c) Are not litigating, as defendants, with the Ministry of Public Finance or with the credit institution granting the financing under the Scheme;

(d) Are not overdue in payment for loans (including leasing) in the six months prior to 31 December 2019 or, if they have overdue payments, those are classified as category A, B or C in the Credit  Risk Center database;

(e) Are not forbidden to issue checks and have not failed to honor promissory notes;

(f) Are not subject to insolvency proceedings;

(g) Provide security to, and meet the eligibility criteria of, the financing credit institution;

(h) Do not have outstanding fiscal obligations to the state or settle such outstanding obligations out of the working capital financing granted under the Scheme; and

(i) Undertake not to lay off existing employees until December 31, 2020.

Types of financing and related state aid and conditions

1. For micro and small enterprises:

• Guarantees for the financing of working capital, excluding interest, commissions and fees, up to 90% of the principal, subject to the principal not exceeding RON 500,000 for micro-enterprises and RON 1 million for small enterprises, and in any case not exceeding the higher of:

(i) Double the amount of salary expenses (including social contributions) recorded in 2019²; or

(ii) 25% of the entity’s net turnover in 2019; or

(iii) Estimated liquidity needs (including working capital costs and investment costs) based on substantiating documents, for the following 18 months as of the date of the loan.

2. For medium enterprises:

• Guarantees for the financing of investments or working capital, excluding interest, commissions and fees, up to 80% of the principal, subject to the principal of:

(i) Working capital loans not exceeding RON 5 million;

(ii) Investment loans not exceeding RON 10 million,

and, in any case, for either type of loan, not exceeding the higher of:

(A) Double the amount of salary expenses (including social contributions) recorded in 2019³; or

(B) 25% of the entity’s net turnover in 2019; or

(C) Estimated liquidity needs (including working capital costs and investment costs) based on substantiating documents, for the following 18 months as of the date of the loan.

3. No beneficiary can be guaranteed for more than RON 10 million;

4. Loan tenors cannot exceed 72 months; but working capital loans are initially provided for 36 months, with the possibility of extending the maturity date by another 36 months.

Subsidies

1. The state subsidizes 100% of the interest, risk assessment fees and security agency fees, but not more than €100,000-120,000 for entities operating in agriculture, fish and aquaculture sectors, and not more than €800,000 for other entities.
2. The total budget allocated for interest and fees subsidies is RON 781 million (approximately €161 million).
3. Once the Scheme terminates, the interest and fees will be payable by the beneficiaries.

Validity

The Scheme is available until December 31, 2020, with grants to be made available until March 31, 2021 (with an extension being possible).

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1. Gambling, production or sale of weapons, ammunition, explosives, tobacco, alcohol, substances under national control, plants, substances and narcotic and psychotropic preparations, investigation, security and protection activities.
2. For companies incorporated after 1 January 2019, the estimated amount of the salary expenses for the first two years of activity.
3. For companies incorporated after 1 January 2019 the estimated amount of the salary expenses for the first 2 years of activity.