The IMM Leasing Program for Equipment and Machinery

The Emergency Ordinance no. 118/2020 regarding the Program supporting small and medium enterprises named “SME Leasing Program for Equipment and Machinery” (hereinafter “GEO 118/2020”) entered into force on the 24th of July 2020.

The SME Leasing Program for Equipment and Machinery (hereinafter referred to as “SME Leasing”) is part of a set of measures included by the government in the National Plan for Investments and Economic Recovery, published in July 2020. Complementary to the SME Invest Program, SME Leasing is intended to facilitate the access to financing for small and medium enterprises. Essentially, the multiannual program will provide guarantees for financial lease agreements concluded between the beneficiary for certain types of goods necessary for its commercial activity.

1. General coordinates of the SME Leasing Program

By means of the GEO 118/2020, the Ministry of Public Finance grants state guarantees in favour of program beneficiaries for lease agreements having as object the purchase of new or second-hand goods, such as IT&C equipment and technology, machinery or technical equipment, or vehicles destined for the transport of goods and persons, used for commercial purposes.

The Ministry of Public Finance will grant state guarantees amounting to:

  • A maximum of 80% of the financing amount, for financial lease agreements for the acquisition of IT&C equipment technology;
  • A maximum of 60% of the financing amount, for financial lease agreements for the purchase of technological machinery and equipment or vehicles for the transport of goods and persons used for commercial purposes.

The state guarantee does not cover interest, commissions and other expenses related to the secured financing. For these, the beneficiaries can access the de minimis aid scheme in the form of subsidies of 50% for interest and of up to 100% for fees.

A beneficiary may receive serveral state guarantees for multiple financings, on the condition that the maximum agregate value of these financings does not exceed 5 million Lei per beneficiary.

2. Beneficiaries of the SME Leasing Program

According to GEO 118/2020, the economic operator that complies with the provisions of the ordinance may benefit from the granted facility. It applies to companies or cooperatives, agricultural companies, production cooperatives, certified natural persons, holders of individual or family enterprises, nonprofit associations and foundations undertaking economic activities. In addition, the beneficiary shall fulfill the conditions prescribed by law for being regarded as an SME, as defined by Law no. 346/2020, or, together with the affiliated companies shall not exceed 250 employees.

The SMEs operating n the following fields are not eligible: (i) financial intermediation and insurances; (ii) real estate transactions: (iii) betting and gambling agencies; (iv) the production and trading of arms, munition, explosives, tobacco, alcohol with the exception of wine and beer, substances under national control, plants, narcotic and psychotropic substances; (v) rental and leasing activities; (vi) investigation and protection activities.

3. Terms and conditions of the lease agreements

The terms and conditions of the financing will be established according to the internal rules of each lessor. However, OUG 118/200 establishes certain coordinates:

  • The lease agreement will have a duration no longer than 72 months, with the possibility of grace periods between 3-12 months.
  • The sum paid in advance is 0%, but, depending on lessee’s request, a sum of up to 20% may be paid in advance.
  • The residual value will be set between 1% and 20% of the purchasing value of the goods.

4. Other collateral

The contract is guaranteed by a movable mortgage over the financed assets.

In addition, the lessor may require the beneficiary to grant additional guarantees in the form of promissory notes covering the value of the remaining unsecured financing (i.e. the percentage of the principal not covered by the state guarantee, interest and fees).

5. Eligibility conditions for beneficiaries

The beneficiaries shall fulfill a set of conditions in order to benefit from the facility:

  • are eligible according to the internal regulations of the lessor;
  • do not find themselves in difficulty, as per the meaning given to such term in Chapter 2.2. of the European Commission Communication “Guidelines on state aid for rescuing and restructuring nonfinancial firms that are in difficulty”;
  • do not stand in a lawsuit as respondent against de Ministry of Public Finance or the lessor;
  • do not have outstanding loans, including lease agreements, in the last 6 months or, in case they do have outstanding loans registered in the Credit Risk Central, they are classified in standard categories (i.e. delays of maximum 15 days);
  • are not prohibited from issuing checks and did not register major incidents for promissory notes in the last 6 months in the Payment Incidents Central;
  • do not have active or suspended garnishments on bank accounts;
  • do not have outstanding tax obligations or other tax receivables administered by the central tax authority.

The lessors in the financial lease agreements guaranteed by the state are the non-banking financial institutions registered on the Special Register held by the National Bank of Romania (NBR), which function pursuant to Law no. 93/2009 and the NBR Regulation no. 20/2009.

6. Eligibility conditions for lessors

Lessors under the lease agreements secured with state guarantees are non-banking financial institutions that are registered with the Special Register heeld by the National Bank of Romania and functioning and organized according to Law no. 93/2009 and NBR Regulation no. 20/2009.

7. Application norms

In order to clarify the conditions for implementing the program, SMEs are waiting for the application norms which will be adopted by the Ministry of Public Finance within 30 days from the date of entry intro force of the present ordinance. The norms will detail the characteristics of the goods that can be purchased through financial lease agreements, as well as the annual ceilings for the SME Leasing Program.