The Czech-Moravian Guarantee and Development Bank („CMGDB“) together with the Ministry of Industry and Trade announced the COVID II program. CMGDB will guarantee the small and medium-sized enterprises for their loans with commercial banks and will also contribute up to a million crowns to pay interest.

Warranty applications will be submitted in round calls. A total of CZK 1.5 billion will be available for each round; after the capacity has been filled, the relevant round will be closed for applications and the next round will be announced 10 working days after the end of the previous round. The first round started today.

The program is financed from the EU Structural Funds within the OPPIK program, therefore, it is necessary to meet the conditions of European legislation and the rules for providing subsidies from the OPPIK program. The assessment of whether an entrepreneur is a small or medium-sized entrepreneur must fully rely on European legislation.

COVID-II program details:

•  Amount of guaranteed loan up to CZK 15 million

•  CMGDB will provide a guarantee of up to 80 % of the principal of the commercial loan

•  Guarantee period of CMGDB up to 3 years

•  Financial contribution to interest payments of up to CZK 1 million

The following items will be eligible for funding under the COVID-II program:

•  Payments for rent, energy

•  Employee wages

•  Payment of supplier-customer invoices

•  Acquisition of material and inventory and small assets

•  Pre-financing of receivables

The application may need to be accompanied by:

•  Balance sheet, income statement for 2019

•  Tax return for the year 2019

•  Overview of trade payables and receivables

•  Calculation of operating costs associated with the operation of the company

•  Description of the reasons for coronavirus affecting the business (e.g. decrease in income, staff outage, supply outage, canceled contracts, overdue receivables, etc.)

A COVID-II guarantee claim will not be approved by an entrepreneur who is bankrupt or in liquidation, or if he has arrears due to his employees' wage claims (this does not apply if the arrears are due to problems caused by the spread of coronavirus infection, i.e. arrears which first occurred during March 1, 2020).

It is also necessary to take into account that the fulfillment of the conditions for drawing the loan guarantee under the COVID-II program will be checked subsequently, just as the fulfillment of subsidy conditions within the OPPIK program is checked. It should be noted at this point that in the event of a breach of the predetermined purpose of using COVID-II funds, lenders will be penalized for possible breaches.

Therefore, it is necessary to prepare the documents carefully and to record and archive all relevant documentation in the usual way in order to avoid undesirable legal risks, including possible prosecution.

If you are considering applying for a COVID-II commercial loan guarantee, contact your bank to arrange the loan as soon as possible. In cooperation with the bank, you can then apply for the CMGDB guarantee on 2 April 2020 on the official form, which will be published here.

You can also contact our law firm, where we will help you with the preparation of complete documentation, as well as with the communication with your bank and with CMGDB.