The National Bank of Hungary (‘MNB’) announced its Funding for Growth Scheme (FGS) in April 2013. The first two pillars of this three-pillar scheme are intended to facilitate access for small and medium enterprises (SMEs) to forint loans and to strengthen their financial stability.
The Funding for Growth Scheme essentially enables small and medium enterprises to take out loans, using the MNB’s refinancing loan, for a maximum term of 10 years at an interest margin capped at 2.5%.
Under Pillar I of the Scheme, the amount granted could be used exclusively for investments, working capital financing, as own contribution for an EU subsidy and as pre-financing of an EU funding.
Under Pillar II of the Scheme, SMEs could use the loans for the refinancing, with a forint loan, of foreign-currency and foreign currency-based loans or financial lease facilities outstanding with a domestic credit institution.
Two main changes occurred during the second phase of the Scheme:
- The maximum term of working capital loans has been increased from 1 year to 3 years. This enables SMEs to cover their initially elevated working capital requirements arising from an investment for a longer period, which helps them keep up their liquidity.
- The inclusion of factoring facilities enables such clients to access financing that were otherwise non-eligible for working capital loans because of their insufficient collateral, but which have customers/buyers with good risk ratings. SMEs that currently fund their liquidity from working capital loans can, by switching over to factoring, use the collateral released as security when taking out investment loans.
Are you eligible?
Micro, small and medium enterprises that meet the criteria defined in Act XXXIV of 2004 on Small and Medium Enterprises and the Support Provided to Such Enterprises and the conditions detailed in the MNB’s Product Information are eligible to take part in the Funding for Growth Scheme.
Until when can you apply for a loan?
SMEs meeting the conditions of the Funding for Growth Scheme can apply for the discount-rated loans until 31 December 2015 under the Scheme.
How can you apply for a loan?
Enterprises can submit their loan applications to the financial institutions taking part in the Scheme.
The list of participating banks can be accessed through the following link: http://www.novekedesihitel.hu/hitelintezetek
What amount can you apply for under the Scheme?
The lower threshold for a loan amount that can be granted to SMEs under the FGS is HUF 3 million, while the upper threshold is HUF 10 billion. The upper thresholds represent the maximum total amount available for SMEs, together with their partner enterprises and affiliates, from all credit institutions and financial enterprises taking part in the Scheme.
Special features of the FGS Plus
The National Bank of Hungary launched the Funding for Growth Scheme Plus (FGS+) product in 2015, through which higher-risk enterprises can also have access to loans. Only new loans can be granted under the FGS+. The lower threshold for the loan amount is HUF 1 million, while the upper threshold is HUF 500 million. The upper thresholds represent the maximum total amount available for SMEs, together with their partner enterprises and affiliates, from all credit institutions and financial enterprises taking part in the Scheme.
In terms of many of its conditions, the FGS+ is identical to the Funding for Growth Scheme, they run parallel to each other, but it is nevertheless an independent scheme under which the central bank not only provides funding for credit institutions, but also takes part in the assumption of potential credit losses.
Only loan objectives eligible under Pillar I of the FGS can be financed under the FGS+:
- investment financing
- working capital financing
- Prefinancing of EU subsidies
- financing of trade receivables through factoring
Under the current conditions, credit contracts can be concluded until 31 December 2015 under both the FGS and the FGS+.
Detailed information on the Funding for Growth Scheme can be found through the following link: