Loans Guaranteed by the State for Social NPO’s (With No Personal Guarantee)
For the first time, social NPO’s can enjoy attractive, convenient loan terms guaranteed by the State for funding an investment or working capital in the NPO, and without providing a personal guarantee.
The State Guarantee Fund for small and medium-sized businesses recently announced that it is opening a new loan track for NPO’s providing services to the government in the fields of health, education and welfare, which will remain in effect until further notice.
With this new track, NPO’s will no longer be required to provide a personal guarantee (which is required in respect of the Fund’s other loan tracks), but rather, will be required to assign the funds to be paid to them in respect of their engagement with the State to the lending bank in the event that the loan is not repaid on schedule.
Loans in this track will be provided to social NPO’s that are providing services in the above-mentioned fields and that comply with the following criteria, in addition to the rest of the Fund’s loan terms:
- The NPO has an engagement in effect with the State (that is valid for at least eight months after the submission of a loan application) at a volume that is 120% higher than the volume of the loan being requested;
- If the NPO is receiving support by virtue of the Budget Foundations Law, provided that not more than 50% of the NPO’s income during the two years preceding the submission of the loan application originated from such support.
The State Guarantee Fund was established a few years ago by the Ministry of Finance (the Accountant-General’s Department) in order to provide assistance to small and medium-sized businesses, whether operating or being founded, in obtaining credit to finance operating activities and growth. The Fund enables financing entities to offer attractive, convenient terms to borrowers, such as the provision of minimal collateral, relatively low interest rates and convenient repayment schedules. The loans are provided by financial entities, while the State undertakes to indemnify them if the businesses default on loan repayments.