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Kafalat Plus
- How much can
Kafalat Plus guarantee?
- How much of the loan does Kafalat Plus
guarantee?
- Are you
eligible for a Kafalat Plus loan guarantee?
- What legal status
must the Kafalat Plus loan guarantee applicant have?
- For what purposes can the Kafalat Plus guaranteed loan be
used?
-
What are the
activities that are excluded from the Kafalat Plus
guarantee
scheme?
- Other Kafalat
Plus loan guarantee conditions
- What
is the cost of the loan? What is the interest rate on the loan?
What is
the cost of a Kafalat Plus loan guarantee?
How much can
Kafalat Plus guarantee?
Currently the maximum loan amount for a Kafalat Plus
guarantee is 600 million Lebanese Pounds or its equivalent in
convertible foreign currencies. This is equivalent to
approximately 400.000 US$. The minimum amount is 4 million
Lebanese Pounds or its equivalent in convertible foreign
currencies.
The size of the loan requested has to reflect the needs of
the project to be financed. The value of the Kafalat approved loan
will depend on the financial requirements of the project as
justified in the business plan / feasibility study.
For funding requirements above 600 million Lebanese Pounds, no
public guarantee scheme exists in Lebanon. However, loans in
excess of 600 million Lebanese Pounds can benefit from interest
rate subsidies by the Central Bank. For further information,
please consult the
Central Bank .
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How much of the loan does Kafalat Plus
guarantee?
Kafalat Plus currently guarantees 85% of the value of the
loan granted by the bank and 85% of the accrued interest during
the grace period + 3 months. (Examples).
The value of the guarantee diminishes proportionally to the value
of the outstanding loan as calculated in the repayment schedule.
Thus, the Kafalat guarantees the repayment of 85% of the
outstanding amount to the bank if the borrower fails to repay.
However, the borrower is liable for the whole outstanding amount
and not only the 15% not guaranteed by Kafalat.
In the case the borrower fails to repay, the file is transferred
to Kafalat that proceeds with the follow up of the outstanding
amount. In any case, the borrower remains liable for the entire
outstanding amount.
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Are you
eligible for a Kafalat Plus loan guarantee?
The applying SME must fulfill all the following conditions:
The guaranteed loan is used for business development: to
establish a viable
new production capacity, or to sustain current production and
employment;
The loan is used in one of the following economic sectors:
Industry, Agriculture,
Tourism, Tradition Crafts, or High Technology;
The SME shall provide evidence in the form of a business
plan, that it has the ability to repay the loan;
The SME must not be engaged in any of the activities
excluded under the scheme as stated below
Preferably, the SME also
Has the potential to export;
Has potential to generate significant value added and/or
use local raw materials and/or introduce new and innovative
technologies;
Operates in rural areas promoting basic infrastructure
and financial support;
Works with new prototypes, products, inventions based on
detailed market analysis, financial and technical appraisal.
For existing SMEs, the enterprise should fulfill the
following:
The SME enterprise must be registered in Lebanon as a
profit making enterprise
No default under any credit facility should have
occurred for the 3-years prior to the date of the request for the
loan;
The SME shall keep regular accounting records and shall
produce standard financial statements audited or certified by an
independent licensed auditor on an annual basis;
The enterprise has 40 employees or less, in majority a
Lebanese labor force;
For start ups, the enterprise should fulfill the following:
The start up must be a bona fide new business venture
which has not conducted any commercial operation in the past;
The start up should be a Lebanese registered entity
employing in majority a Lebanese labour force; with the majority
shareholder; or in the case of a sole trader or partnership, the
individual or main partner should be a over 18 years of age;
No default under any credit facility should have
occurred during the 2 years prior to the date of loan request for
any of the partners associated to the start up;
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What legal status
must the Kafalat Plus loan guarantee applicant have?
Kafalat Plus
loan guarantees are given to incorporated SMEs only (ie: SAL, SARL,
COOPERATIVE... )
For what purposes can the Kafalat Plus guaranteed loan be
used?
The Kafalat Plus guaranteed loan could be used for all
business related expenditures that include:
Purchase of equipment and capital goods. (These can be new or
used)
Plant renovation, expansion, etc.;
Purchase of raw materials, spare parts, working capital,
and consulting fees;
Construction costs. (However, the loan should not be
exclusively used to cover
construction costs.)
Marketing promotion activities, such as participation in show
rooms, foreign
exhibitions, etc.;
Research and development;
Other strategic objectives that serve the interest of
SMEs and start ups.
The expenses have to be relevant to the business activity
that is the subject of the loan and the expenditures have to occur
after the approval of the loan guarantee.
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What are the
activities that are excluded from the Kafalat Plus
guarantee scheme?
The following activities will not qualify for loan guarantees
under the guarantee scheme:
Manufacturing or selling arms, weapon, or munitions;
Activities that contributes to the violation of
internationally recognized workers and human rights conventions or
Lebanese labour laws;
Any activity defined as illegal, or environmentally
hazardous and dangerous for
human health;
All activities involved in the gambling industry;
Activities involved in currency speculations;
Security investments, or other type of financial assets;
Activities in the real estate sector.
Other Kafalat
Plus loan guarantee conditions
The borrower must commit to making a minimum
contribution of 20% in personal equity, either in kind (subject to
KAFALATs approval) or in cash towards the cost of the project;
For SMEs expansion projects, the final debt/equity ratio
should be at most 70/30, or equity should be not less than 30% of
total outstanding liabilities;
Loans may be only approved for the purchase, renovation
or extension of premises, machinery and equipment, working capital
and up to 15% of cost of professional fees and services related to
the project;
Project costs incurred before a loan guarantee
application is made will not be taken into consideration, unless a
prior written justification is given by the bank and approved by
KAFALAT;
In any case, cost incurred should not exceed 6 months
prior to the loan application;
Repayment of third party loans will not be considered
eligible;
The lending
bank is not allowed to require from the borrower any collateral on
top of the Kafalat loan guarantee.
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Repayment
of Kafalat Plus guaranteed loans
The loan has to be repaid within a maximum period of 7 years. New
loan guarantees include a grace period of between 6 and 12 months
depending on the expected business revenue. In the grace period,
the borrower makes no payment, neither principal nor interest.
Loan guarantee extensions and increases cannot benefit from an
additional grace period. Kafalat loan guarantees have a maximum
duration of 7 years, starting from the date of the initial
guarantee.
Example:
A borrower receives a loan guarantee of 200 million Lebanese
Pounds on January 1, 2002. A couple of years later, the borrower
wishes to expand the business which requires additional funding.
The maximum additional Kafalat guarantee could be 100 million
Lebanese Pounds, irrespective of how much of the loan has already
been repaid. Similarly, the last repayment of the loan must take
place on Dec. 31, 2009 or before.
Loan repayment is made by equal principal payments over the
period of the loan. See
examples.
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What
is the cost of the loan? What is the interest rate on the loan?
What is the cost of a Kafalat Plus loan guarantee?
Cost of Kafalat Plus loan guarantee:
Definitions:
Loan value: is the value of the loan granted by the bank
Kafalat Plus guarantee: 85% of the loan value granted
by the bank
Kafalat commission: 2.5% of the value of the guarantee
Interest accrued during grace period is the value of the
interest charged to the
borrower during the grace period where the borrower is not
making any
repayments
Interest accrued for 3 months: the interest that is charged
by the bank for the first
3 months after the grace period
Formula:
([Loan Value + interest accrued during grace period + interest
accrued for 3 months ]* 85% * 2.5%) + ([Loan Value + interest
accrued during grace period + interest accrued for 3 months ] *
0.3% fiscal stamps)
The 0.3% fiscal stamp fee is charged once.
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Interest rate charged:
Kafalat Plus guaranteed loans can be taken in Lebanese
Pounds, US$, or any other transferable currency.
Lebanese Pounds: banks charge the borrower 40% of the
interest on the
Lebanese Treasury Bills (TBs) of 1 year. For information on
current TB rates,
please check the
Central Bank.
The Central Bank subsidizes a maximum 7%, or the interest
charged, whatever is lower.
Example:
If the Lebanese TB (1 year) is 6.75%, the bank uses 5.7% as
the interest rate on the loan. (6.75% * 40%) + 3% = 5.7%
As this rate is less that 7%, the whole interest is paid by
the central bank, and the borrower pays no interest rate.
If the Lebanese TB (1 year) rises to 12%, the bank
calculates an interest rate of 7.8% on the loan, and the Central bank subsidizes 7%. The
interest rate paid by
the borrower is in this case 0.8%.
US$: The banks charges LIBOR (1 year) + 5.5%. (For
up-to-date LIBOR rates,
please consult the
British Bankers Association.
The Central Bank subsidizes a maximum 7%.
Example:
If the LIBOR (1 Year) is 2.28%, the bank uses 7.78% as the
interest rate on the loan. The Central bank subsidizes 7%. The interest rate paid
by the borrower is in this case 0.78%.
Final cost of the
loan:
The final cost of the loan is made up of:
Cost of Kafalat commission
Interest charged to borrower
One time file fee may be charged by bank (maximum 400.000
Lebanese Pounds)
Some banks charge an additional bank commission of 0.2% of
the outstanding
balance calculated every three months
0.3% fiscal stamps fee paid once
See
examples.
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