Loans to cost 3.35% on average
Hellenic Bank (HB) released details on how it will disburse the EUR 56 mln in loans that it will be offering to Cyprus small-to-medium-sized enterprises (SMEs), with the average cost of the loans likely to hover close to 3.35%, in line with Financial Mirror predictions.
The European Investment Bank signed a EUR228 mln loan agreement with Cypriot commercial banks, part of a broader strategy to boost liquidity to SMEs on July 10.
As part of the agreement, Hellenic Bank signed a deal for EUR 58 mln, of which it pledged to lend EUR 28 mln in Cyprus and EUR 30 mln in Greece. The Cypriot banks have committed to match the EIB loans with their own funds available. Thus, in the case of HB, it will lend a total of EUR 56 mln in Cyprus and EUR 60 mln in Greece, for a total of EUR 116 mln.
Glafkos Mavros, HB Group General Manager, said that upon approval by the EIB, the loans will be disbursed within 18 months with up to 6,000 HB clients eligible to participate in the scheme.
Pricing
Mavros revealed that HB has set a minimum spread of 1.9%, plus Euribor 6 months for applications that meet its highest lending standards, including providing adequate collateral and a sustainable business plan. Euribor 6 months was last at 1.15%, which means the best customers of HB would get the EIB loans at 3.05% while the worst off would get the loans at 4.65%.
“For those who have a weaker credit rating, the spread will increase, but will not exceed 3.5%,” said Mavros, adding that even with this added spread, the cost will be better than traditional loans offered to SMEs.
“We (Hellenic Bank) will not make money out of these loans. We are taking part in the scheme to offer our SME clients better rates, and also position ourselves to participating in future schemes that we hope the EIB will announce for Cyprus,” he said.
The minimum loan under the scheme will be EUR 200,000 and the maximum EUR 600,000 with a 2-12 year loan period and a 2-year grace period on capital. Mavros told the Financial Mirror that the minimum loan amount has been lowered to EUR 200,000 in order to allow greater participation by SMEs.
Loan Shifting
George Evripidou, Business Services Division Manager, said the EIB loans may be used for refinancing purposes, provided that the previous loan has been taken not more than six months ago.
All SMEs employing less than 250 persons and with an annual turnover not exceeding EUR 50 mln or an annual balance sheet total value not exceeding EUR 43 mln are eligible to apply. In effect, about 90% of Cyprus businesses are eligible. Holding and Leasing companies and those involved in gambling, tobacco and other offending sectors as well as property development companies will not be allowed to participate.
Evripidou had previously told FinancialMirror.TV that Hellenic Bank will be sending loan application packages of EUR 5 mln to the EIB for final approval, with the EIB having promised that the decision will be taken in less than four months.
