Frequently asked questions
Financial Aid for Business
Is a negative response for financing from a credit institution necessary to apply to the fund for aid?
Yes. When applying to the State Aid Fund for Business for financial aid, you must provide either a written refusal from a credit institution to grant a loan or a credit institution’s offer to the enterprise to provide financing on extremely unfavourable terms.
What are the criteria for granting financial aid?
You can find information on the criteria for financial aid from the State Aid Fund for Business here.
Are there any restrictions on the amount of financial aid?
The size of a loan can be from EUR 300,000 to EUR 2,000,000, and assistance through debt securities will be provided from EUR 1 million. Loans or bonds for one enterprise cannot exceed 25% of its 2019 turnover; a subordinated loan for a large enterprise cannot exceed 8.4% of its 2019 turnover, and a subordinated loan for a medium-sized enterprise cannot exceed 12.5% of its 2019 turnover. Equity investments are enough to enable the enterprise to continue operating, but without exceeding its pre-crisis capital.
What period is the financial aid granted for?
The State Aid Fund for Business will provide financial aid for a maximum period of six years.
Relevant information for investors
How to become an investor in the State Aid Fund for Business?
Once the fund is up and running, a public selection call for institutional investors will be announced. Institutional investors will be selected through a public, transparent and non-discriminatory procedure – all institutional investors with an impeccable reputation can apply during the period of signing investment contracts. International financial institutions will also be invited to invest.
National security screening of the selected institutional investors shall be performed by the Commission for the Coordination of Protection of Objects of Importance to Ensuring National Security. The first three investors will be given a discounted management fee.
How is investment risk managed?
The Fund’s governance framework ensures the proper representation of investors’ interests and the transparent, sustainable and independent activities of the Fund. Investment decisions are taken by the Fund’s investment committee, which is composed of independent investment experts.
The total remaining outstanding (unsold) value of instruments for one enterprise according to signed investment contracts may not exceed 10% of the total assets of the Fund. Efforts will also be taken to diversify investments between the sectors of economic activity affected by COVID-19 and the investment instruments provided for in the investment policy.
Requirements for enterprises
When taking investment decisions, the Fund carefully assesses the position and future prospects of the enterprises applying for financial aid. Enterprises must provide detailed information about their financial position, liabilities, and any constraints or restrictions imposed on their assets. The safeguards in place ensure that the enterprises that receive financial aid use it purposefully, for example, that there is a clear purpose for the use of the funding as well as financial indicators that the enterprise must achieve with the support.
What is the distribution waterfall?
Cash flows from the Fund shall be paid in the following sequence:
- the Fund manager’s management fee;
- repayments to limited partners commensurate with their investments until the total amount distributed is equal to the initial capital invested with interest (hereinafter – the hurdle rate), except for the private and additional state investment equivalent p. The hurdle rate is calculated according to the ICE BOFA BB Euro High Yield Index (HE10) when support from the Fund is received;
- repayment to the state of part Z of the total limited partner investments, plus the same hurdle rate. Part Z shall be calculated according to the formula Z = p / (1 + p). For example, if p = 20%, Z = 1/6 of the total limited partner investments;
- any excess return exceeding the hurdle rate shall be divided between the Fund manager and the investors (both institutional investors and the state): the Fund Manager shall receive 10% of the exclusive rights to the profit share if the Fund’s annual operating result is over 0% (e.g. if the Fund can receive a return of more than 4% when the hurdle rate is 4%), and 20% if the Fund’s annual operating result is over 25% (e.g. if the Fund can receive a return of more than 5% when the minimum hurdle rate is 4%). The investors shall share the excess return commensurate with the capital invested.
What is the Fund management fee?
The Fund Manager shall be entitled to receive a management fee (hereinafter – the management fee) from the Fund for each investor, calculated as follows:
- Until the end of the investment period:
- 2% of the capital investment per year – up to EUR 100 million;
- 1% of the capital investment per year – more than EUR 100 million;
- After the end of the investment period:
- 1% of the capital investment per year at the beginning of each quarter of the respective accounting period, if the investment capital is less than EUR 100 million;
- 75% of the capital investment per year at the beginning of each quarter of the respective accounting period, if the investment capital ranges from EUR 100 million to EUR 200 million;
- 0.5% of the capital investment per year at the beginning of each quarter of the respective accounting period, if the investment capital is more than EUR 200 million.