The Romanian Government has recently adopted through Government Emergency Ordinance no. 42/2020 a series of measures aimed to support SMEs and microenterprises whose businesses have been affected as a result of the COVID-19 crisis. It is estimated that the state aid detailed below will be granted to a maximum number of 40.000 beneficiaries, against a total budget of EUR 161 million. 

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COVID-19: State aid scheme for SMEs and microenterprises

The Romanian Government has recently adopted through Government Emergency Ordinance no. 42/2020 a series of measures aimed to support SMEs and microenterprises whose businesses have been affected as a result of the COVID-19 crisis. It is estimated that the state aid detailed below will be granted to a maximum number of 40.000 beneficiaries, against a total budget of EUR 161 million.

1. General overview. Eligibility

Among the most important measures adopted by the state in a bid to support Romanian businesses are:

  1. increase of the threshold for state guarantees to 80%, respectively 90% of the credit value for credits granted to SMEs and microenterprises for investments or working capital; and
  2. subsidizing 100% of interests and risk and administration charges for working capital or investment credits secured with state guarantee.

Also, an important restriction has been instituted, in an attempt to limit the social effects of the crisis which poses risks for a significant number of employees working in SMEs to be laid off. As such, in order to be eligible for state aid, SMEs and microenterprises must undertake to not lay off existing employees until 31 December 2020. However, companies may organize the working schedule of the employees depending on the evolution of the company, meaning that arguably the current measures allow companies that have reduced their working hours as a result of a decrease in activity to apply for state aid.

Further, companies that want to apply for state aid in relation to investment credits must bring additional collateral guarantees covering at least 100% of the financing value, aside from the state guarantee and the mortgage over the assets financed through the credit.

Companies that have requested other types of state aid for the same eligible costs or companies against which measures for state aid recovery have been initiated or executed are non-eligible for state aid under the current context. Also, non-eligible for state aid are companies operating in sectors such as gambling and betting, production or trade of weapons, ammunitions, explosives, tobacco, alcohol, substances under national control, plants, narcotic and psychotropic substances, investigation and protection activities.

It is worth noting that the methodological norms detailing how the state aid can be accessed are still in course of preparation. Also, measures adopted on the basis of the GEO no. 42/2020 must be in correlation and in full observance of the Communication from the European Commission regarding the Temporary Framework for State aid and measures to support the economy in the current COVID-19 outbreak.

Please find below a more detailed description of the state aid measures that could be considered by Romanian companies in the current context.

2. Increase of the threshold for state guarantees to 80%, respectively 90% of the credit value 

This measure applies to financing granted to SMEs and microenterprises for investments or working capital.

As such, credit facilities for investments or working capital will be guaranteed by the Ministry of Public Finance up to a maximum of 80% of their value, excluding interest, fees and bank charges related to the secured credit. The maximum value of the financing is RON 5,000,000 in case of working capital credits and RON 10,000,000 for investment credits, certain limitations being applicable, depending on the expenses with workforce, turnover or liquidity necessities of the company.

In case of micro and small enterprises, guarantees will be granted for credits/lines of credit for working capital up to a maximum 90%, excluding interest, fees and bank charges. The maximum value of the financings will be of RON 500,000 for microenterprises and RON 1,000,000 for small enterprises, certain limitations being applicable as well, depending on the expenses with workforce, turnover or liquidity necessities of the company.

Moreover, the aggregate maximum value of the financings guaranteed by the state that can be granted to a beneficiary as per these facilities is RON 10,000,000.

All the above financing thresholds are absolute maximum thresholds provided by the law, the financing limits for each beneficiary being the highest of:

  1. Double the amount representing employee expenses for 2019 (including mandatory social contributions to the state budget). For companies set up after 1st January 2019 the amount representing employee expenses estimated for the first two years of activity will be taken into account; or
  2. 25% of the net turnover of the beneficiary for 2019. In case the beneficiary is an individual who performs independent activities an amount of 25% of the gross income for 2019 will be taken into account; or
  3. A value, supported with relevant justifying documents, required to cover the beneficiary’s liquidity necessities for a maximum of 18 months. The amount can include working capital costs, as well as investment costs.

The maximum period for credits/lines of credit for working capital is of 3 years, with the possibility of extension with another 3 years. For investment credits, the maximum period for financing is 6 years.

3. Subsidizing 100% of interests and risk and administration charges for working capital or investment credits secured with state guarantee 

Through this measure, the Ministry of Finance will cover through grants 100% of the interests and risk and administration charges related to state guaranteed credits/ lines of credit which have been granted to SMEs and microenterprises.

The grant covers interests and risk and administration charges until 31 December 2020 and, as a general rule, beneficiaries may apply for grants in a maximum limit of EUR 800,000 each. By way of exception, the grant may not exceed EUR 120,000 for beneficiaries operating in fishing and aquaculture sectors or EUR 100,000 for beneficiaries operating in the primary production of agricultural products.