Individual loan insurance program

• 14.03.2023.
• News, Finances

Investments continue to take place despite the crisis, therefore HBOR is implementing the Liquidity Loan Insurance Program until the end of the year. Find out who this type of loan is intended for and what are its advantages.

Money becomes very costly due to inflationary trends. Interest rates on commercial loans continue to rise, and this should be the trend during the next two quarters of the year. 

On the other hand, the market does not stand still, investments continue to occur even in times of crisis, so the depletion of capital reserves creates a need for current assets. In addition to commercial banks, development banks play a particularly important role in the market, either placing funds or providing loan guarantees on more favorable terms. 

If you are an exporter - and most domestic companies in the field of tourism are exporters - the Individual Loan Insurance Program for exporters' liquidity is available. It is a measure to help the economy of the Republic of Croatia after the Russian aggression against Ukraine, which is implemented by the Croatian Bank for Reconstruction and Development (HBOR) as an insurer in the name and on behalf of the Republic of Croatia. 

 

Who is the Loan Insurance Program intended for? 

Its purpose is to enable new loans for liquidity, i.e., it cannot be used to refinance existing loans. The insurance program is intended for entities that perform economic activity regardless of size and legal form, and that are registered in the Republic of Croatia and that meet the conditions from the extension. 

The end users of this insurance program are exporters in the Republic of Croatia who need liquidity for their activities and who are faced with difficulties that are a direct or indirect result of disruptions in the economy caused by the Russian aggression against Ukraine. 

Who can be the beneficiaries of this Insurance Program? 

These disturbances include those caused by sanctions introduced by the European Union or its international partners, as well as economic countermeasures taken by, for example, Russia.  

So, we are talking about entrepreneurs who encountered difficulties in business as a result of the relevant disruptions in the economy. These difficulties can be cancellations of orders and contracts, delays and/or temporary stops in procurement, production, or deliveries, delays or inability to collect existing claims from customers, etc. 

Eligible applicants are does not subject to EU sanctions and have experienced business difficulties as a result of economic disruption caused by Russian aggression against Ukraine. Exporters are entrepreneurs who, in the last business year for which official annual financial reports are available, achieved:  

a) at least 10% of export income in business income or  
b) more than 50% of overnight stay income in business income, where in that year the share of overnight stays of non-residents of the Republic of Croatia in the total number of overnight stays of at least 30% or  
c) who have achieved at least 10% of their income with one or more exporters. 

 

Advantages of the Individual Loan Insurance Program 

The advantages of the Insurance Program are insurance up to a maximum of 90% coverage of the principal amount of the loan for the exporter's liquidity. Furthermore, with a coverage amount lower than 90%, the contracted interest - regular, intercalary and deferred interest - can also be covered by the insurance. 

The amount of the Loan per one Loan user can amount to a maximum of:  

1. 15% of the average total annual income that the Loan user achieved during the last three closed accounting periods or  
2. 50% of energy costs during the 12 months prior to the month in which the loan application was submitted or  
3. the Loan user's needs for liquidity in the next 6 months for large entrepreneurs, i.e., 12 months for micro, small and medium-sized entrepreneurs, which is determined on the basis of the Loan User's Statement on the need to use a larger amount of loan compared to the criteria under paragraphs 1 and 2. This statement should contain an appropriate explanation of why the previous two criteria are not appropriate, as well as an explanation of the more significant difficulties that the Loan User is facing as a result of the current crisis. 

 

To whom the Insurance Program is available 

The insurance program is available to all loan institutions in the Republic of Croatia that have a business establishment in the Republic of Croatia (head office or branch) and that operate in accordance with the Law on Loan Institutions, as well as for HBOR as a creditor.  

The loaning mechanism is such that interested clients submit loan requests to the commercial bank’s creditor, which then submits individual requests for insurance to HBOR as the insurer. 
Both commercial banks and HBOR, as financial intermediaries, are obliged to provide exporters with more favorable loaning conditions, which can be reflected in:

• in the form of a higher volume of financing - by approving greater exposure to the exporter,  
• taking over riskier portfolios - by approving loans despite the exporter's riskier rating, lower requirements for other insurance instruments,  
• lower interest rates and others. 

 

Fee and deadline 

For each loan insured under the Insurance Program, a fee for processing the insurance application is paid, which amounts to 0.10% of the amount of the insured loan principal (without interest), a minimum of EUR 199.08 and a maximum of EUR 1,990.84. 

An insurance premium is also paid. The annual premium rates are determined depending on the size of the loan beneficiary and the amount of placement coverage.  

The cost of the premium can be reduced because loan users have the option of using subsidies for insurance premiums in accordance with the Insurance Premium Subsidy Program - a measure to help the economy of the Republic of Croatia after the Russian aggression against Ukraine PSP-UKR-01/23.  

The insurance program will be implemented until December 31, 2023, by the time all such contracts must be concluded. 
 

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