Permanent Working Capital Financing Programme

    1. Programme Objective 

Having in mind the needs of the Montenegrin economy for permanent working capital, IDF MN JSC shall continue in 2019 its activities regarding credit line for permanent working capital financing.

2.      Loan Purpose 

Permanent working capital encompasses funds required for financing current obligations arising from regular business activities of the end loan beneficiary, pertaining to raw material and material, inventories, other production costs, accounts receivable. 

In accordance with the above, loan funds may be used for:

·         purchase of raw material, production material, intermediate products, inventory;

·         Overheads. 

Loan funds may not be used for:

·         Repayment of existing loans (except in the part of the funds obtained through the refund of the investment);

·         Strictly financial activities (i.e. purchase of securities);

·         Lending to buyers or other natural persons and legal entities;

·         Procurement of fixed assets. 

Financial support shall not be approved for the following purposes:

  • Production and sale of military equipment or services;
  • Participation in projects violating internationally recognized employee rights, including safety at work, rules and procedures in Montenegro;
  • Any of the activities perceived as illicit or environmental and/or human health threat: gambling, tobacco, alcoholic beverages (except wine and fruit brandies);
  • Banking and insurance;
  • Foreign exchange and/or securities trading;
  • Immoral and illegal activities. 

If a loan is financed from the European Investment Bank, funds can not be used for VAT financing.

3.      Loan Beneficiaries 

Loan beneficiaries may be companies and entrepreneurs and all forms of organizing established by the Law on Business Entities, as well as subjects engaged in business activities governed by the rules of their corresponding area of activity (artisans, agricultural producers, PHI etc.). 

Through this credit line, IDF MN JSC shall finance projects of end users who make their profit in one of the following fields: 

  • Production;
  • Wood processing;
  • Agriculture and food production;
  • Tourism and hospitality;
  • Services;
  • Trade; 

End beneficiaries of these loan arrangements may be entities that have obtained a confirmation from the Tax Administration on their tax arrears. 

Right to a loan is not a guaranteed right and IDF MN JSC shall enact a decision on each Loan Application.

4.      Lending Method 

IDF MN JSC implements this Programme through: 

·         Direct lending to the loan beneficiaries,

·         Financing end beneficiaries of loans through commercial banks that have established business relation with IDF MN JSC. 

Loan Applications that are not supported with mandatory defined documents shall not be taken into consideration. 

Based on the Loan Agreement between a commercial bank and IDF MN JSC, the commercial bank shall enter into agreement with the end beneficiary of the loan.

5.      Loan Conditions 

Loans approved under this credit line and financed by the European Investment Bank (EIB), will be approved at an interest rate from 0.50% to 0.70%[1] lower compared to the interest defined hereinafter. 

A) Direct lending 

•    Maximum amount of up to €3.000.000,00[2], except in cases when the means of security is a bank guarantee, the credit amount may be up to €1.500.000,00 (for entrepreneurs and agricultural producers up to €30.000,00);

•    Minimum amount of € 10.000,00;

•    Interest rate of 4,50% annually with the proportional interest calculation method;

•    Maximum term of 6 years (including grace period);

•    Grace period up to 1 years. 

INCENTIVE MEASURES FOR DIRECT LOAN ARRANGEMENTS: For entities which are registered in Northern region municipalities or in municipalities below the average value of the development index in Montenegro or entities that, from the moment of realization of the funds, employ 3 or more new persons a special incentive measure of reduction of the interest rate by 0,50% shall be approved. Additionally, incentives shall pertain to loans approved with a commercial bank’s guarantee, in a way that the initial interest rate will be decreased by 1,00%. Aforementioned incentives may only be used on one ground at the time. 

Special incentives will be approved to business entities that regularly settle their tax liabilities, i.e. are on the "white list" or have provided confirmation that they duly settle their tax obligations by meeting the criteria to be found on the "white list" of the competent state body, in the form of reduced interest rates by 0.50% (it is necessary to provide confirmation of the state body or an official document of the state body which will be submitted to the IDF MN JSC). 

Active direct beneficiaries of this type of IDF MN JSC's loans may apply again for additional funds, bearing however in mind that the overall exposure on the basis of the loan to one client (including all related persons) is in accordance with his balance indicators.

Full exposure to one client including all connected persons shall be defined by the internal acts of IDF.

In case of a direct loan arrangement that is fully or partially supported by a bank guarantee, cash collateral or State guarantee, such loan arrangement or its proportional part shall not be considered as exposure of the end beneficiary. 

B) Lending through commercial banks:

  • Maximum amount up to €3.000.000,00;
  • Minimum amount of € 10.000,00;
  • Interest rate of 5,00% annually from which the bank belongs 3%;
  • The Bank has the right to arrange a lower interest rate with the client,
    in which case the interest rate of the Fund is from 1,5% to 2%, but not less than 1,5%[3];
  • Maximum term of 6 years (including grace period);
  • Grace period up to 1 years. 

NOTE: Business bank shall, based on its own business policy, have the right of approving a loan to the client in a percentage it deems appropriate, from its own potential and under the terms it establishes at its own discretion. 

Special incentives will be approved to business entities that regularly settle their tax liabilities, i.e. are on the "white list" of the competent state body or have provided a certificate to properly settle their tax obligations by meeting the criteria to appear on the "white list",, in the form of reduced interest rates by 0.50% (it is necessary to provide confirmation of the state body or an official document of the state body which will be submitted to the IDF MN JSC). This incentive measure applies to direct loan arrangements and through banks.

6.      Fees 

Direct loan arrangements shall be subject to the following fee:

  • 0,30% on the approved amount for subjects implementing projects in northern municipalities of Montenegro and in municipalities below the average value of the development index in Montenegro;
  • 0,40% on the amount approved for projects implemented in other municipalities. 

Fees for loans realized through commercial bank IDF MN JSC shall not be charged, and the fee shall be agreed upon between the bank and the end beneficiary.

7.      Utilization of Loan 

Loan utilization period is up to 6 months.

Final utilization period shall be established on the case-by-case basis for each individual loan arrangement dependent on the real needs and the dynamics of investing.

Loan beneficiaries shall be obliged to a dedicated usage of loan funds in accordance with this programme and agreement signed between IDF MN JSC and loan beneficiary.

IDF MN JSC shall check whether the loan is used for the stated purpose, and the approved funds cannot be used for paying obligations to natural persons, related persons, nor paying internal invoices.

IDF MN JSC shall execute approved direct loans by transferring funds to the User's account optionally on a one-time basis. 

The transfer of funds under loan arrangements through and with the guarantee of commercial banks shall, as a general rule, shall be a one-time exercise. 

In case of extending loans to final beneficiaries through commercial banks, commercial banks are obliged to establish and maintain documents and keep records that provide for a prompt and efficient control of dedicated usage of loans, as well as for defining other conditions for utilization of loan finds in accordance with legal requirements. IDF MN JSC retains the possibility of exercising control over dedicated usage of loan funds in direct contact with the end beneficiary.

8.      Means of Security 

As means of security, IDF MN JSC shall accept bills of exchange, mortgages over immovable property, bank guarantees, local self-governments’ guarantees, guarantees of the Government of Montenegro guarantees of prudential legal entities, stocks of receivables, premiums, subsidies, grants and direct payments provided by the Ministry of Agriculture and Rural Development and other generally accepted instruments of security in the banking sector, in accordance with the Acts of IDF MN JSC and decisions passed by competent bodies of IDF MN JSC. 

All costs with regard to providing instruments of security as well as of the execution of insurance-related tasks, deletion and retrieval of realized instruments shall be carried by the loan beneficiary. 

In case of loans through and guaranteed by commercial banks, bills of exchange and bank authorizations shall be accepted as collateral, whilst the bank retains the right to contractually arrange means of security with the end beneficiary.

9.      Required Documents 

Documents required for realization of the project through direct loan arrangement:

·         Loan Application;

·         Projections of financial reports for the loan repayment period;

·         Excerpt from the Central Registry of Business Entities - not older than 30 days;

·         Certificate on VAT registration, if the end user is subject to the VAT;

·         Valid statute of the Company;

·         Authorization for retrieving data from the Regulatory Loan Registry of the Central Bank of Montenegro (RKR), including founders and related parties[4];

  • Valid form of certified signatures of persons authorised for representation (OP) and valid specimen signature card;

·         Tax Administration certificate on settled taxes and contributions – not older than 30 days;

·         A set of annual financial statements (Balance Sheet, Income Statement, annual account balance (Trial balance), analytical breakdown of buyers and suppliers) – for the past two years, as well as the interim aforementioned reports for the current year, exception being the clients that are not subject to mandatory compilation of financial statements;

·         Audit report for loan beneficiaries that are subject to statutory audits under the law;

·         Official form for reporting on settlement of monthly taxes and social contributions for employees, verified by the Tax Directorate as evidence of the number of employees;

·         Proposal of the collateral;

  • Pro-forma invoices, preliminary agreements (photocopy or original) on procurement of raw materials, intermediate products, inventory and payment of monthly bills (IDF MN JSC shall not accept offers/preliminary agreements issued by natural persons, exception being purchase of real estate, offers/preliminary agreements issued by related parties or internal invoices). The documents in subject may not be dated more than three months from the date of the submission of the Loan Application.

All documents shall be submitted in Montenegrin language. 

Executive office of the IDF MN JSC retains the right to request additional documents. 

Documents required for realization of the project through and with the guarantee of a commercial bank:

  • Projections of financial reports for the loan repayment period;

·         Decision of the bank’s competent body;

·         Decision on registration of the end beneficiary in the Central registry of Business Entities or in another register of the competent authority;

·         Certificate on VAT registration, if the end user is subject to the VAT;

·         Tax Administration certificate on settled taxes and contributions – not older than 30 days;

  • Balance Sheet and Income Statement for the past two years;
  • Official form for reporting on settlement of monthly taxes and social contributions for employees, verified by the Tax Directorate as evidence of the number of employees;

·         Pro-forma invoices, preliminary agreements (photocopy or original) on procurement of raw materials, intermediate products, inventory and payment of monthly bills (IDF MN JSC shall not accept offers/preliminary agreements issued by natural persons, exception being purchase of real estate, offers/preliminary agreements issued by related parties or internal invoices). The documents in subject may not be dated more than three months from the date of the submission of the Loan Application.

  • Statement on related parties. 

All documents, as a general rule, shall be submitted in Montenegrin language. 

Executive office of the IDF MN JSC retains the right to request additional documents.

10.   Other Provisions 

Additional rules applicable to this Loan Programme, which are not mentioned in this document, are defined in special acts passed by competent bodies of IDF MN JSC.

11.   Credit Line Validity 

This Credit Line shall be valid until 31 December 2019, until it’s altered or terminated. 

President of the Board of Directors of IDF MN JSC 

       PhD Zoran Vukčević                                                                                                     

 



[1] In addition to regular stimulation in the interest rate of 0.5% on funds withdrawn from the EIB, it is additionally possible to achieve stimulation at an interest rate of 0.2% if the requirements of the EYET initiative relating to the employment of young persons to the utilization of funds foreseen in the contract with the EIB.

[2]The Board of Directors of IDF has the right to approve a higher loan amount in a particular case considering the entire loan arrangement.

[3]If the interest rate towards to final beneficiary with all incentives is 4% on an annual basis, the Bank and the client can agree an interest rate of up to 4,5% annually, exclusively if there is a mutual interest of the final beneficiary and the Bank

[4] Article 3, point 8 of the Law on Banks - (Official Gazette of Montenegro 17/08 of 11 March 2008, 44/10 of 30 July 2010, 40/11 of 8 August 2011)

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