Undertaking of surety

Under the current statutory powers granted to it (under Act XXXIV of 2014), in the interest of improving the operation of small and medium enterprises, increasing their competitiveness, and promoting their development, Garantiqa helps enterprises access funding by undertaking surety guarantees. Garantiqa undertakes surety guarantees in order to encourage the granting by credit institutions of loans and guarantees to enterprises, as well as the use by them of financial leasing services related to factoring and production-asset purchases provided by credit institutions and financial enterprises. The undertaking of surety guarantees by Garantiqa enables financial institutions to extend credit, provide factoring and financial leasing services or undertake guarantees to economically viable businesses that would otherwise — that is, without Garantiqa’s undertaking of a surety guarantee assuring the requisite additional security — have to borrow and use factoring and financial leasing services under far less favourable terms, or would otherwise be entirely unable to do so. The surety guarantees mitigate the credit risk of financial institutions.

By assuming surety guarantees, Garantiqa undertakes to ensure that in the event that the debtor, the obligor of the guarantee or the user of factoring or leasing services defaults on its payment obligations vis-à-vis the financial institution, then — to the extent of the guarantee commitment undertaken — Garantiqa itself will fulfil such obligation vis-à-vis the financial institution in place of the debtor. If a surety guarantee is required in relation to a transaction, the financial institution may contact Garantiqa with a request to provide such a guarantee, in view of the fact that credit institutions are Garantiqa’s partners.

Garantiqa Creditguarantee Co. Ltd.’s partners

Credit institutions and specialised credit institutions with a share equity amounting to a nominal value of at least HUF 10 million as well as co-operative credit institutions with a share equity amounting to a nominal value of at least HUF 1 million are eligible to use Garantiqa’s surety guarantees related to loans and guarantees. Any co-operative credit institution that, at the time of the foundation of the Company, contributed – through the founding savings co-operatives and the National Association of Savings Co-operatives – to the paying up of the share capital of the Company shall also be eligible to apply for a surety guarantee.

The beneficiary of the surety contract may also, in the case of cash loans granted from the National Microcredit Fund, be the Hungarian Enterprise Development Foundation, and in the case of micro-lending activity, the county and metropolitan enterprise development foundations.

Also eligible for the use of Garantiqa’s surety guarantee service are those financial enterprises that have concluded an agreement with Garantiqa for a surety guarantee in relation to their lending, leasing or factoring activities.

Garantiqa has partnered with the majority of Hungarian financial institutions, banks and savings cooperatives.

The list of individual Agreements concluded with the partners — in the framework of which Garantiqa assesses the submitted applications in a simplified procedure — can be accessed through the following link: Credit and bank guarantees

Documents necessary for a guarantee application

Garantiqa Creditguarantee Co. Ltd.’s surety guarantee can be applied for electronically through the e-Application system or in hardcopy using the Company’s dedicated application forms.

The data sheets contain information on the customer and the transaction, and list the mandatory annexes to an application.

As of 1 July 2014, a uniform customer declaration was introduced, and at the same time, the basic customer declaration was discontinued together with the three related optional declarations that depended on the form of the aid (de minimis, block exemption and agricultural block exemption), the fee subsidization declaration and the declaration on compliance with the requirements regarding “ordinate labour relations”.

A declaration must be obtained from the natural person owner and leading officer of customers (debtors) operating as a business association or cooperative society on the handling of their data, so a pertaining declaration was introduced on 1 July 2012; only the owners whose data is disclosed by the bank in section 4 of the application form are required to sign this declaration.

As of 1 July 2012, Garantiqa has extended to all guarantors the requirement regarding the obtainment of a guarantor declaration, and the number of declarations has increased accordingly (guarantor’s declaration — enterprises).

The forms can be accessed using the following link: Application forms

Procedure of application for a guarantee

Applications for the undertaking of a surety guarantee by Garantiqa shall be submitted to Garantiqa by the financial institution providing the service — prior to the disbursement of the loan or the issuance of the guarantee statement or, in the case of a factoring contract, prior to the payment of advances on invoices, or, in the case of a financial lease contract, prior to the transfer of the leased object into the possession of the lessee.

Applications for surety guarantees must be submitted either electronically through the e-Application system or using the dedicated form provided by Garantiqa (application form), along with the requisite annexes listed on the form, which form an inseparable part of the application. If using the e-Application system, Garantiqa does not require any hardcopy documents as the application package is submitted electronically, while hardcopy applications must be sent by post, courier or in person. (To submit an application electronically, a pertaining agreement must be concluded between the financial institution and Garantiqa.)

The list of application forms, declarations and required annexes that are necessary for a guarantee application can be accessed through the following link: Application forms

Assessment of guarantee applications

Upon receipt of the surety guarantee applications, Garantiqa examines whether the application meets the requirements defined in the Business Regulations and the Announcement.

Garantiqa determines compliance with the requirements and the existence of excluding conditions based on the submitted documents, its own records and the financial institution’s and the debtor’s declarations.

In the case of applications submitted in the context of an Agreement/simplified procedure, Garantiqa makes a decision on the acceptance or rejection of the application within 3 working days.

Iindividually assessed applications are officially received within 3 working days, and the decision is passed within no more than 7 working days from the receipt of the application.

During the evaluation process, both the credit institution and the debtor may be requested to provide supplementary data or to participate in the reconciliation of data, and the length of time needed for such shall be added to the evaluation period.

Guarantee contracts and service fees

The service fees for the undertaking of guarantees are set out in Garantiqa’s latest effective Announcement that can be accessed through the following link: Business Regulations/Announcement

Following a positive decision on a surety guarantee application, Garantiqa sends the signed contract to the financial institution along with the invoice on the surety guarantee fee and a statement on the aid content, as well as any other necessary annexes.

The financial institution must return the contract signed by it to Garantiqa within 20 days from the dispatch of the contract.

If the financial institution fails to pay the fee by the date stated on the invoice, Garantiqa may terminate the surety guarantee contract and refuse any claim request.

Forms of aid in relation to surety guarantees

A surety guarantee provided to companies subject to the SMEs Act alongside a sovereign counter-guarantee or a New Széchenyi counter-guarantee qualifies as an aid. Aids granted in accordance with the Treaty establishing the European Community are surety guarantees granted in the context of the de minimis Regulation, the Transitional Aid Regulation and the Block Exemption Regulation.

Under the de minimis Regulation, the rules of aiding allow companies to receive a guarantee of maximum EUR 2.5 million during any 3 financial years for securing their loans and leasing facilities used for the procurement of production assets, in the context of which the de minimis aid may not exceed EUR 200,000, or EUR 100,000 in the case of companies engaged in the transportation of goods on public roads. Guarantees of up to EUR 1.5 million can be provided for guarantees and factoring transactions in the case of a five-year term, or of EUR 750,000 in the case of a ten-year term.

Agricultural enterprises are an exception to these general rules. According to the rules on agricultural de minimis aid, a guarantee of maximum EUR 2.5 million may be provided to these enterprises for their loans and leasing facilities used for the procurement of production assets, provided that the total amount of the agricultural de minimis aids does not exceed EUR 15,000 over the course of any three financial years.  For guarantee and factoring transactions, guarantees may be provided alongside a sovereign counter-guarantee in the amount of EUR 112,500 for a term of five years, or of EUR 56,250 for a term of ten years.

If the guaranteed amount is lower and/or is provided for a term of less than five or ten years, the amount of the aid must be calculated as a proportion of the above maximum amounts.

The EU rules on aid also allow SMEs and agricultural enterprises, on the basis of block exemption, to apply for a surety guarantee alongside a sovereign counter-guarantee, in relation to their intangible or tangible asset investments; the relevant detailed rules are set out in the Business Regulations and the annex thereto.