Even as the solutions adopted by the Polish Parliament in an attempt to mitigate the negative consequences of Covid-19 do not introduce many significant changes as far as the financing sector is concerned, some of the amendments concerning business financing are certainly noteworthy.
Renegotiation of Bank Loans
Based on the Anti-Crisis Shield, businesses will be able to renegotiate the terms and conditions of loans taken out before 8 March 2020, including repayment schedules. Financing banks are obliged to assess borrowers’ economic and financial standing as of 30 September 2019 at the earliest, while disregarding any negative effects that the current crisis might have on borrower operations. It is worth keeping in mind that for any contractual amendments to be made, borrowers and lenders have to reach compromises that are satisfactory to both parties.
Loan Repayment Guarantees
The Polish National Development Bank (BGK) will be able to guarantee the repayment of loans taken out by businesses other than micro- and small enterprises with the aim of ensuring their financial liquidity. Such guarantees will be available upon application and, as a rule, granted for a fixed period and amount, securing up to 80% of the outstanding amount of the loan. Additionally, they may take the form of public aid.
Although specific terms and conditions of this scheme, as well as other types of support to be made available by BGK, are yet to be announced, their general outline – along with a list of financing banks – is available at https://www.bgk.pl/pakietpomocy/ (in Polish).
One of the advantages of guarantees provided by BGK is that they increase the likelihood of obtaining (or maintaining) a loan through securing its repayment over a specified period and tend to be more cost-effective or otherwise more economically advantageous than guarantees offered by commercial banks. This is, among others, due to the fact that BGK does not take a commission for issuing certain types of guarantee and in some cases even subsidises the repayment of interest on loans secured by its guarantees.
Insurance and Export Guarantees
Amendments to the Anti-Crisis Shield provide for the possibility of insuring, among others, instruments such as bank loans, credit limits for issuing guarantees or letters of credit. The purpose of such insurance is to protect lenders (especially banks) in case of losses sustained in connection with the financing of export contracts.
Issuers and businesses meeting certain criteria (particularly regarding the export of domestic products) may apply for export insurance – either as policy holders or insured parties – and insurance guarantees. The detailed terms and conditions of such insurance are to be specified in relevant agreements made with the Export Credit Insurance Corporation
Industrial Development Agency’s Support Scheme
Forms of support offered by the Industrial Development Agency (ARP) will include, in particular, loans, guarantees, hire-purchase agreements, and other means of business financing. Support will be available to businesses experiencing financial difficulties (having recorded a decrease in economic turnover that meets specific statutory thresholds) as a consequence of bans and restrictions relating to Covid-19. However, businesses that are subject to restructuring proceedings or have been declared bankrupt will not be eligible for support.
Support will be granted upon request, based on agreements specifying the terms and conditions on which the support is to be granted and how it can or cannot be used. The entire procedure may be performed online and relies largely on applicants’ own statements. The beneficiaries of the scheme will receive support enabling them to maintain financial liquidity throughout the current epidemic, as well as for a period of 12 months thereafter, when it is hoped that the negative economic impact of Covid-19 will be less pronounced.
Financial Shield
The Polish Development Fund (PFR) is launching a support scheme comprising a:
- Financial Shield for Microenterprises (employing at least one person), worth PLN 25 billion;
- Financial Shield for Small- and Medium-Sized Enterprises, worth PLN 50 billion; and
- Financial Shield for Large Enterprises, worth PLN 25 billion and consisting of the Liquidity Shield, Financial Shield, and Capital Shield
The support afforded to micro-, small-, and medium-sized enterprises will predominantly take the form of partially non-repayable financial subventions, which are to compensate for some of the losses sustained as a consequence of the Covid-19 epidemic. On the other hand, large enterprises can receive non-gratuitous and fully repayable financial support, preferential financing with and investment financing using capital instruments, on market terms and as public aid.
To be eligible for such support, businesses must meet certain criteria. These include, in particular: (i) having recorded a specific decrease in economic turnover; (ii) having had conducted business prior to the end of 2019; (iii) being subject to no pending bankruptcy, restructuring, or liquidation proceedings; (iv) having an ultimate beneficial owner (UBO) with tax residence in Poland; and (v) having no arrears in payment of taxes and social security contributions.
As a rule, funds transferred to businesses as part of the Polish Development Fund’s scheme will not be subject to judicial or administrative enforcement.
Support will be provided based on an appropriate agreement, specifying how the funds are to be used and – in the case of subventions and other types of non-repayable financial support – on what conditions and to what extent such funds do not have to be repaid (with the key factors including job retention and continued operation). The procedure itself is to be fairly straightforward, relying on applicants’ statements and being completed almost entirely online. More information about the scheme can be found at https://pfr.pl/tarcza.html (content in Polish).
By Katarzyna Sawa-Rybaczek, Partner, and Lukasz Czerepak, Junior Associate, Penteris