Bridge Loan Against Subsidy

Product Description

Investment Loan
  • Long-term loan for funding approved investment costs according to an agreement made under OP.
  • Applicants must have an agreement made with the State Fund Agriculture (SFA) on an approved grant project.

VAT Bridging Loan

  • Providing a credit facility for VAT payments made under the project funded under section 1.
     Target Group
  • New and existing clients of BDB Microfinancing who meet the lending criteria, farmers - individuals registered as farmers, legal entities, sole proprietors, cooperatives cultivating agricultural land (own or leased).
  • Companies/farmers with no financial and business history can be funded if solvent third parties (individuals and/or corporate entities) that meet the BDB Microfinancing requirements and will jointly guarantee the servicing of the loan are provided for the requested funding.

    Loan Amount

Investment Loan

  • Up to BGN 200,000/(EUR equivalent) and under the following condition:
  • Up to 90% of the value of the investment project, net of VAT,
  • Minimum deductible: 10% of the cost of the investment project, net of VAT.
  • Client's deductible can be less than 10% (the loan amount can be greater than 90% of the amount of the investment) if additional collateral, which is significant for the client, is provided (the only one or main production facility, property in which the client lives, etc.), providing coverage of the credit exposure (investment loan and VAT loan) of at least 150%.

VAT Bridging Loan

  • Up to 90% of the VAT due on the approved expenses as provided for by the agreement made between the borrower and SFA and the applicable tax legislation.

  Currency

 BGN, EUR

  Drawdown and Disbursement

5.1. Drawdown period

Investment Loan

  • As agreed, but not more than 12 months from the loan agreement date.

When the funding is used to purchase fixed assets, the drawdown period shall correspond to the delivery and testing (if any) period and the commissioning period.

  • For construction, acquisition and improvement of real estate, the drawdown period shall not be longer than the period provided for by the project time schedule.

VAT Bridging Loan

  • As agreed, but not exceeding the drawdown period of the investment loan

5.2. Disbursement  

Investment Loan

  • In one or more disbursements
  • Cashless disbursement to borrower’s account opened with the Bank.

VAT Bridging Loan

  • In one or more disbursements. The funds disbursed and drawdown will be used to pay approved counterparties the VAT due on any invoice under the agreement made between the borrower and SFA.
  • Cashless disbursement to borrower’s account opened with BDB AD

5.3. Utilization Terms

Investment Loan

  • The funds shall be used according to the intended purpose of the loan submitting proofs of expense.
  • For loans provided for new construction and/or construction and installation works, the funds shall be released in multiple disbursements and used according to the intended purpose of the loan after:
  • - an on-site visit,
  • - ascertainment of the construction and installation works performed as per Statements of Works Performed, corresponding to the approved budget under the relevant Bill of Quantity (BoQ) and under the Fund’s project confirmed by an expert from the Credit Administration Department,
  • - submission of proofs of expense corresponding to the submitted Statements of Works Performed.

Loans provided for new construction purposes shall be released in multiple disbursements, as follows:

  • First Disbursement: an amount sufficient to reach the stage of certification provided for by Article 181 of the Town and Country Planning Act (TCPA), confirmed earlier by the Credit Administration Department
  • Second Disbursement: 50% of the remaining portion of the investment loan. Such disbursement shall be made after:

- Project verification and opinion by the Credit Administration Department after completion of the first fix stage of construction (Form 14) and issuance of such certificate as provided for by Article 181 of TCPA.

- Creating a mortgage on the building completed to the first fix stage (Form 14) and on the land.

  • Third Disbursement: the remaining portion of the investment loan. This disbursement shall be provided after:

- Project verification and opinion by the Credit Administration Department after completion of the first fix stage of construction (Form 14) and issuance of such certificate as provided for by Article 181 of TCPA.

VAT Bridging Loans

  • The funds shall be used according to the intended purpose of the loan upon submission of invoices for the approved expenses issued by the contracting parties approved according to the agreement made between the Borrower and SFA.
 Repayment

6.1. Maximum repayment period

Investment Loan

  • Up to 10 years for the construction, acquisition and improvement of real estate and purchase of land.
  • Up to 10 years for the creation and/or replanting of perennials, dessert wine vineyards, honey tree species for honey production and fast-growing shrubs and tree species for bioenergy production.
  • Up to 5 years for the purchase of new machinery, equipment, vehicles and other assets for business needs.
  • Up to 18 months for the purchase of computer software.
  • Up to 18 months for know-how costs and costs incurred for the acquisition of patent rights and licenses and registration of trademarks and processes necessary for the preparation and implementation of the project.
  • Up to 12 months for the general costs incurred for the project for feasibility studies, charges, architect fees, engineer fees, consulting services, advice on the environmental and economic sustainability of the project, and technical feasibility studies.
  • The maximum repayment period shall commence on the date of execution of the loan agreement.

Note!

  • For projects that include a combination of the investments described above, the maximum loan period shall be equal to the longest allowable period according to the product card.

VAT Bridging Loan

  • Up to 6 months after the project implementation date under the agreement made between the borrower and SFA.

7.2. Repayment Method

Investment Loan

  • By decreasing monthly instalments (with equal principal);
  • By annuity monthly instalments;
  • Flexible repayment schedule option consistent with the seasonal nature of the business;
  • The loan shall be repaid with each disbursement of the subsidy (grant) to the account of the borrower, as provided for by the agreement made between the borrower and SFA. The date of loan repayment using the subsidy (grant) shall be the project implementation date as defined in the agreement made with SFA, extended by 4 months;
  • The borrower shall repay the loan using the subsidy amount disbursed to borrower’s account opened with BDB. Following the repayment of the loan using the approved subsidy (grant), BDB Microfinancing, at the request of the client, may reduce the loan repayment period maintaining the agreed amount of repayment installments or reduce the amount of repayment installments maintaining the originally agreed loan repayment period.

In the event that no or smaller amount of subsidy funds are disbursed:

The Borrower shall:

  • provide BDB Microfinancing with the documents sent to the Borrower by SFA containing a reasonable refusal to pay the subsidy or reasons for reducing the subsidy amount.
  • repay the planned installment(s) using own funds.

Jobs MFI may: 

  • requested additional collateral;
  • increase the interest rate on the loan by 1 percentage point.

VAT Bridging Loan

  • By each VAT refund received or by own funds. The employee in charge of the loan management shall monitor the client's account and see to the repayment of the loan with each VAT refund received.
  • Should any VAT refund received is not used for the repayment of the loan, BDB Microfinancing may terminate the utilization of the loan.
  • Should no VAT refunds are received or are insufficient to fully repay the loan, a repayment schedule for a period of up to 24 months can be agreed upon.

7.3. Grace period on principal payments

  • As agreed, but not exceeding 12 months from the loan agreement date or until the due date of the final payment of the project subsidy (as agreed under paragraph 7.2.), whichever comes first.

 Collateral

  • Investment Loan
    First ranking pledge/mortgage on the assets subject to investment pursuant to the agreement made between the borrower and SFA*.

*The collateral for the two loans is created in a notarial deed and in any such separate pledge registration applications as provided for by the Registered Pledges Act /RPA/. 

  • First ranking pledge under RPA of a claim on the subsidy (grant) under the project from the Rural Development Program /RDP/. For the purposes of calculating the coverage, the subsidy (grant) is deemed to be of up to 70% of the approved but unpaid amount (the difference between the approved amount of the subsidy and the advance and interim payments paid).
  • It is mandatory to submit such notice as provided for by Article 17 of RPA, filed with SFA.
  • A pledge must be registered as provided for by RPA on any current and future claims on all accounts of the borrower opened with BDB AD.
  • The company owners and/or managers must jointly guarantee the loan servicing by becoming co-debtors on the loan;
  • Other collateral: Any eligible collateral under BDB Microfinancing Lending Rules.

Note!

When securing the loan, a combination with other national and EU programs can be recommendable, including but not limited to any NGF and COSME guarantee schemes, but only as additional collateral.

VAT Bridging Loan

  • The same collateral as for an investment loan.
  • Pledge of a claim of a VAT refund due from the State Budget related to the implementation of an approved project, on the basis of an agreement made between the State Fund Agriculture and the Borrower.

8.1. Collateral Coverage

  • To cover the entire credit exposure together with the 12-month interest rates.

 Interest rates 

  • As agreed

9.1. Interest on overdue principal

  • Interest on principal (not overdue) + 10% margin
 Charges and fees  
  • As per the Charges and Fees Tariff
 Lending criteria  
  • A minimum of 12 months of business history. Newly established companies/agricultural producers could be funded, but only if they provide solvent third parties (individuals and/or corporate entities) that will jointly guarantee the servicing of the loan.
  • Good credit history of the borrower and related parties as follows:
  • At the time of applying for a loan there should be no current exposure in a group higher than "under supervision" (according to information obtained from the Central Credit Register (CCR));

- The applicant must have no public liabilities (to the state budget, National Social Security Institute (NSSI), etc.)*;

- There must be no enforcement proceedings initiated against the borrower and the co-debtors.

 Other requirements  

  • Mandatory requirement to direct all bank payments through the accounts of the borrower opened with BDB AD.
  • In case of an already existing contractual relationship with a third party: bank payments shall be directed pro rata to the allowed loan amount.
  • Upon client’s consent, BDB AD shall open a special account, other than the loan servicing account, in which the subsidy (grant) shall be received.
  • In the cases where the agreement made with the State Fund Agriculture specifies the current account of the client in BDB AD, the loan could be drawdown before changing the number of the current account with the number of the special account, in which the expected subsidy is to be received. This change shall be made within two (2) months from the loan agreement date. For the change of the account number, the client shall submit to BDB Microfinancing an Annex to the agreement made with the State Fund Agriculture. Should the client fail to provide an Annex for the change of the account within the specified period, BDB Microfinancing may suspend the utilization of the two loans (investment loan and VAT loan) and increase the interest rate by 1 percentage point.
  • The loan must be reviewed every 12 months by conducting a financial position analysis, project inspection, check-up of the implementation of the terms and conditions of the loan agreement and the product card, and collateral revaluation;
  • When insuring the collateral, when it is subject to financing, an addendum specifying that BDB Microfinancing will be the second beneficiary after SFA can be issued.
 Client benefits  
  • Receiving a special-purpose product for client’s investment financing needs;
  • Long maximum loan period;
  • Possibility for a long grace period and optimized repayment schedule;
  • Flexible product offer tailored to client’s needs;
  • Wide loan scope;
  • Quick initial client evaluation
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