Preferential loans for legal entities and individual entrepreneurs
The state provides loans to businesses for resuming operations and for expenses related to the borrower’s business activities. The funds issued are not earmarked; they can be used not only for wages, but also for the repayment of other loans and other purposes.
There is a limitation: the issued funds cannot be used to pay salaries if the amount exceeds the specified amount in the employment contract; spend the loan on the payment of dividends, buyback of own shares or shares in the authorized capital, charity.
The soft loan is designed for small and micro-enterprises from industries affected by the coronavirus (Government Decree of 05/16/2020). It is necessary that the main or any additional type of business activity according to OKVED be included in the list of affected industries. Medium and large businesses will be able to take advantage of benefits only if the main activity is included in the list of affected industries. However, companies that have changed OKVED after March 1, 2020, are in the process of bankruptcy, liquidation or have suspended their activities, cannot qualify for a preferential loan.
The maximum loan amount is calculated as the product of the estimated wage, the number of employees as of June 1, 2020, and the number of months from the moment the loan agreement was entered into until December 1. The earlier the loan is issued, the more money you can borrow at a reduced rate.
Issuance of funds: after the approval of the loan, the bank will not be able to transfer the entire amount to the current account. The Bank can do this in monthly payments not exceeding double the estimated wage.
The agreement provides for a preferential credit rate of 2% and the bank’s standard rate. The accrual of interest at a preferential rate begins from the moment the loan is repaid. At the standard rate – either from 1 December 2020 or 1 April 2021.
If after December 1, the number of employees in the company decreased by more than 20% in the period from June 1, 2020 to December 1, 2020 compared to the data as of June 1, 2020, then the loan must be repaid in full on the terms of the standard interest rate.
The number of employees is calculated at the end of each month. If employees were reduced, and by December 1 the state was restored to 80% of the June value, the loan would have to be repaid in tough conditions. The refund must be made in three equal parts (December 28, 2020, January 28 and March 1, 2021).
For companies where, before December 1, 2020, the number of employees does not fall below 80% of the indicators recorded on June 1, 2020, an observation period will be introduced, which will last until April 1, 2021.
If during the observation period the company does not keep the number of employees at the level of 80% of the figures for June, then the loan must be repaid at the standard interest rate.
In a company where the number of employees at the end of each month will not fall below 80% of the indicators on June 1, 2020, the loan and interest will be written off by half.
Full write-off of loan repayment obligations and collateral interest is due to companies that by March 1, 2021 will retain at least 90% of the number of employees from the figures for June 1, 2020, in which the average salary is not lower than the minimum wage and which do not file for bankruptcy by April 1, 2021
What to look out for
The budget for this program is limited. If there are too many applicants, the company may not have time to take part in the program. Therefore, the application must be submitted as early as possible!
Responsibly approach the choice of a bank for obtaining this loan. If the bank violates any conditions of the Government, then the company’s soft loan will turn into a loan on standard terms. The loan agreement of the bank must state that the loan is issued for the resumption of activities, and the expiration date must be June 30. If these conditions are violated, the bank may have problems obtaining compensation from the state, and the company or individual entrepreneur, respectively, will have to return this loan under standard conditions.
Before contacting a bank and taking money on credit, you need to carefully assess the situation in business. This state program is profitable: in fact, free money to support the company’s activities. The program will greatly help many legal entities and individual entrepreneurs, but if the company fails to maintain the average number of staff, the money will have to be paid on standard terms, and in three payments in a short time, and not within several years. Interest will be calculated not at a preferential rate, but at a regular rate. If the business goes bankrupt by that time, the debts to the bank will not go anywhere, they will be collected.