Background information

Due to the outbreak, several companies are in a difficult position financially to continue providing their services/products, to pay their loans or to start a new business (for example, opportunities created by the corona outbreak). For this purpose, the state provides additional funds to KredEx (a state founded foundation) and Rural Development Fund to provide support measures to companies in a form of loans and loan guarantees. On a smaller scale, those measures are already available and relevant instructions for the applicants and terms and conditions of the measures have been approved by the KredEx at the end of March 2020, but additional government finances are needed for the full provision of these measures. For this, the supplementary state budget was approved by the Parliament on 15 April 2020.

Content of measure

KredEx, the Credit and Export Guarantee Fund (state founded foundation), provides loans and loan guarantees to companies. To relieve the impacts of the COVID-19, KredEx offers additional loan guarantees and loans:

1. emergency loan guarantee for issuing new loans and to relax the repayment schedules of existing bank loans,
2. emergency loan for companies who have been turned down by banks.

The guarantee enables a company to secure the obligations of an enterprise, arising from loan, leasing and guarantee contracts.

Requirements to be eligible:

• According to the financial projections presented, the company is sustainable and solvent in the long term.
• The company was not in difficulty as of 31 December 2019.
• The company has no overdue debts which have incurred before 1st January 2020.
• No bankruptcy or liquidation proceedings have been initiated against the company.

General conditions:

• The sum of outstanding amounts of loans or loan guarantee of KredEx cannot exceed €5 million per company.
• The total amount of emergency loans from KredEx and loans with emergency guarantee by KredEx cannot exceed double the salary cost of the company for 2019 with social tax.

Exceptions are available: the maximum guaranteed obligation could be up to 25% of the company's turnover in 2019 or to a justified 18-month liquidity requirement for a SME or to a justified 12-month liquidity requirement for a large company).

Specific conditions by type:

• New loans, guarantee: Up to 90% of the guaranteed loan or lease (60% in case of a construction or retail/wholesale trade sector company).
• Existing loans, fixed guarantee: Up to 35% of the loan and lease to be secured, but no more than the sum of the payments of the principal amount of the loan or lease which will remain accessible to the company until 31 December 2021.
• Existing loans, proportional guarantee: Up to 50% of the loan and lease to be secured.
• Extraordinary loan by KredEx: the amount is up to €5 million. The interest rate is from 4% per annum in case the loan is at least 50% collateralised, and 6% per annum in case of only owner-guaranteed loan.

The validity period of the guarantee is 72 months; the loan period is 6-72 months. The guarantee can be issued and amended until 31 December 2020.

For agriculture, fishing and food industry companies, similar measures are provided by the Rural Development Fund . The total amount of the funding is €200 million.

The maximum loan amount for single-applicants is up to €1 million, if the loan is taken together with a credit or financing institution, the maximum amount is €2 million. The interest rate is from 2% and fixed for 2 months. The loan period is up to six years, in case of investment loans - ten years. At least 30% of the loan must be guaranteed (e.g. real estate, surety or other). Loan applications are accepted until 23 December 2020.

In case of loan guarantee, similar to KredEx measure, the total amount of the loan to be guaranteed cannot exceed double the salary cost of the company for 2019 with social tax, 25% of the company's turnover in 2019 or a justified 18-month liquidity requirement for an SME or a justified 12-month liquidity requirement for a large company. Up to €5 million is guaranteed, but not more than 90% of a proportionally guaranteed loan or 35% of a fixed guaranteed loan. The length of the guarantee is up to six years.

Use of measure

KredEx: data available here .

By 8 July 2021, 610 applications have been filed, of which 485 have received a positive decision in the total amount of loans of €385.9 million.

By 28 September 2021, 719 applications have been filed, of which 595 have received a positive decision in the total amount of loans of €403.8 million.

Rural Development Fund: data available here .

By 2 July 2021, 166 applications for guarantees in the amount of €53.5 million and 371 applications for loans in the amount of €156.7 million were received. 159 guarantee (€46.9 million) and 314 loan (€85.7 million) decision were made and altogether 444 contracts were signed (total amount €118 million).

By 28 September 2021, 176 applications for guarantees in the amount of €58.3 million and 371 applications for loans in the amount of €156.7 million were received. 163 guarantee (€48.5 million) and 314 loan (€85.7 million) decision were made and altogether 449 contracts were signed (total amount €120.3 million).

By 10 December 2021, 181 applications for guarantees in the amount of €61.6 million and 371 applications for loans in the amount of €156.7 million were received. 165 guarantee (€49 million) and 314 loan (€85.7 million) decision were made and altogether 452 contracts were signed (total amount €121.3 million).

In November 2020, the National Audit Office of Estonia published its audit on KredEx measures. The main conclusions were that the interest of companies for the KredEx measures has been significantly lower than initially expected and as the aims, terms and conditions of the measure were too general, the benefits expected by state from the measure should be more clearly specified.

In May 2021, the National Audit Office published an audit covering the main support measures provided to companies during the crisis. The main conclusions were that KredEx measures have mostly been used by companies indeed in need of the support, while the Rural Development Fund's support was mainly used by companies whose activity was less affected by the crisis compared to those who did not receive the support. This was further specified in June 2021, when the Audit Office published an audit on Rural Development Fund's procedures for loan applications, especially on the equal treatment and transparency of the allocation of the crisis support. The main conclusion of the audit was that the actual impact of COVID-19 was not taken into account sufficiently enough when assessing the applications and not enough information was collected for sufficient assessment when making decisions. Thus, as the measure was intended for crisis support and while indeed some companies really needed the support, there is a risk that as a whole the support measure did not at the end solve the crisis and decreased the state's ability to help those in need in the future.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Public support service providers	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	No involvement as case not in social partner domain	Consulted
Form	Not applicable	Any other form of consultation, institutionalised (as stable working groups or committees) or informal

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: Peak or cross-sectoral level

Involvement

In addition to the sectoral business association, the Estonian Employers Confederation was consulted during the design of the measure. The possibility to give feedback was open to all interested parties. Trade unions did not participate in the consultation process due to the nature of the measure.

Views and reactions

Peak-level employers organisation and sectoral business organisations have been partially in agreement with the measure, stating that while overall the measure is necessary, numerous restrictions of the measure hinder the accessibility of the measure.

Sources

• 27 March 2020: Extraordinary fixed guarantee conditions for existing loans (www.kredex.ee)
• 27 March 2020: Extraordinary proportional guarantee conditions for existing loans (www.kredex.ee)
• 27 March 2020: Extraordinary proportional guarantee conditions for new loans (www.kredex.ee)
• 27 March 2020: Conditions of the extraordinary loan (www.kredex.ee)
• 15 May 2020: Rural Development Fund loan guarantee conditions (www.mes.ee)
• 25 November 2020: Audit by the National Audit Office of Estonia (www.riigikontroll.ee)
• 04 March 2021: Rural Development Fund measures continued in 2021 (www.agri.ee)
• 19 March 2021: Kredex measures 2021 (www.kredex.ee)
• 12 May 2021: Ülevaade ettevõtete toetamisest COVID-19-kriisi ajal (Overview of supporting enterprises during the COVID-19 crisis) (www.riigikontroll.ee)
• 19 May 2021: Crisis easures opened again in April 2021 (MESi kriisimeetmed on taas avatud) (mes.ee)
• 07 June 2021: Kriisilaenude menetlus Maaelu Edendamise Sihtasutuses (Procedure for loan applications related to the corona crisis at the Rural Development Foundations) (www.riigikontroll.ee)
• 09 August 2021: Valitsus otsustas jätkata MESi kriisimeetmetega aasta lõpuni (Crisis measures will be used until the end of year) (www.mes.ee)