JEREMIE Bulgaria: Clarification of the Call for Expression of Interest 009/6

Question 1

What is the maximum loan amount for a single SME and respectively, how is the Gross Grant Equivalent calculated under the JEREMIE funded financial instrument with an embedded risk sharing (JEREMIE Financial Instrument or “JEREMIE FI”)? 

As stipulated in the call, the maximum loan amount per SME will in no case be greater than such a loan amount that would result to the Gross Grant Equivalent (“GGE”) to exceed EUR 200,000 per undertaking (or EUR 100,000 per undertaking active in the road transport sector) for a period of three consecutive years calculated in accordance with article 2, par. 4 (a) from Commission Regulation (EC) No 1998/2006.    

The GGE will be based on the difference between the total interest the enterprise will pay due to the reduced interest rate charged by JEREMIE for its part of the loan capital and the interest the enterprise would pay if JEREMIE charged the same interest rate as the Bank (market rate) for its own part of the capital. This difference is computed based on the interest rate applied by the Bank at the moment the loan agreement is signed.

It should be noted that the difference of each future instalment should be represented with its present value; the discount rate which applies at the time the basic reference rate for the GGE is calculated augmented by 100 base points (in accordance with Communication from the Commission on the revision of the method for setting the reference and discount rates (2008/C 14/02) published in OJ C 14 of 19.1.2008, p. 6).

The reference rates are published by the European Commission at http://ec.europa.eu/competition/state_aid/legislation/reference_rates.html

Question 2

Are revolving loans, overdrafts and the letters of credit considered as eligible SME transactions?

These products are currently not eligible. EIF is currently finalising a product development process aimed at inclusion of revolving loans, credit lines, letters of credit and overdrafts. Subject to its completion such products could become eligible.

Question 3

What is the definition of “Loss” under JEREMIE FI, i.e. which loan components (principal, regular interest, default interest, fees and commissions, etc.) are guaranteed by the EIF?

The EIF and the Financial Intermediary will share the risk on each SME loan financed by the facility on a pari passu basis (i.e. the EIF will cover 50% of the losses on an Eligible SME loan).

The Loss Amount includes in general

1        any principal amounts (excluding late payment or default interest, capitalised interest, fees and any other costs and expenses) due, payable and outstanding at such time under the terms of a SME Loan (or, in the case of a SME Loan subject to a SME Loan Default, which would be due if that SME Loan were accelerated at such time on the assumption that an event of default had occurred at such time) following the occurrence of either:

(X)      a SME Loan Default; or

(Y)      a SME Loan Acceleration,

whichever is specified in the Specific Terms of the FRSP Agreement; and

2        any reduction in principal amounts (excluding late payment or default interest, capitalised interest, fees and any other costs and expenses) payable as a result of a SME Loan Restructuring,

SME Loan Acceleration means, in respect of a SME Loan, and unless otherwise specified in the Specific Terms, the occurrence of an event of default (howsoever defined) under such SME Loan which has entitled the Borrower to accelerate payment of any amounts owed to it and the Borrower has exercised such right of acceleration (or is prevented from exercising such rights of acceleration solely by application of mandatory laws and regulations preventing or staying the exercise of such right). 

SME Loan Default means, in respect of a SME Loan, and unless otherwise specified in the Specific Terms, that either (i) the Borrower considers at any time (acting reasonably in accordance with its Credit and Collection Policies) that the relevant SME is unlikely to meet its payment obligations under such SME Loan (without recourse by the Borrower to action such as realisation of security); or (ii) the relevant SME has failed to meet any payment obligation under the relevant SME Loan which has continued for at least 90 consecutive calendar days.

Question 4

Is a Guarantee Final Date envisaged under JEREMIE FI? Does the guarantee cover a SME transaction in case it is restructured, i.e extension of the loan tenor and as a result, it exceeds the maximum maturity of 120 months?

The EIF will share losses incurred by the financial intermediary on any SME loan co-financed by the Financial Instrument calculated under the risk sharing arrangement at any time until the final maturity date of the SME loan. In no case, including restructuring, the loan term may exceed 120 months. 

Question 5

Is a Guarantee Cap Amount envisaged under JEREMIE FI? How is the Guarantee Cap Amount calculated? What is the maximum Guarantee Cap Rate? 

The agreement will defined the maximum portfolio amount of SME loans which would be included by the FI. Given the risk sharing element which is embedded in this funding product, EIF will assume the obligation to share losses incurred by the financial intermediary on each SME loan co-financed by the Financial Instrument at 50%. 

Question 6

Are there any triggers related to the portfolio build-up? 

For the optimal utilisation of JEREMIE resources, EIF reserves the right to request appropriate financial covenants and undertakings by the selected financial intermediary under the Operational Agreement.

For illustrative purposes, standard triggers may typically include:

(a)                           A minimum amount has not been lent (with monies disbursed) by the financial intermediary by not later than a date fixed in the agreement, or

(b)                           Minimum Credit Rating for the financial intermediary to be complied with at any time or

(c)                           a minimum Gearing Ratio to be complied with at any time greater than that identified in the agreement or

(d)                           a maximum portfolio default rate at certain fixed dates or portfolio amount being disbursed or

(e)                           the minimum  Capital Adequacy Ratio to be complied with at any time  or

(f)                            the minimum Current Ratio to be complied with at any time or

(g)                           a maximum Bad Loans Ratio to be complied with at any time or

(h)                           a maximum Cost/Income Ratio to be complied with at any time or

(i)                            any additional trigger event identified. 

Question 7

When is the EIF repayment claim reduced in proportion to the Losses occurring under the risk-shared portfolio, i.e. after the acceleration of the SME transaction or after the end of the recovery procedures?  

The repayment claim of EIF is reduced by Loss Amount multiplied by the risk sharing rate at time of default or acceleration. The financial intermediary shall return any recovery cashed on defaulted loans times the risk sharing rate to EIF.

Question 8

Point 1.8. of the Eligibility Criteria described in Annex 2 states that the Financial Intermediary has to have the ability to deliver nationwide geographical coverage in Bulgaria. How should this ability be proven in the application? Would information on the volume and number of the extended loans to SMEs in all Bulgarian regions be satisfactory for proving ability to deliver nationwide geographical coverage?

It is to the discretion of the applicant to decide how to present the information to cover this point in an optimal manner. Notwithstanding this, the suggestion of presenting the volume and number of extended loans in all Bulgarian regions is indeed accurate – provided that the structure of the branch network is also presented.

Question 9

According to Annex 2 if the JEREMIE funds provided by the EIF remain undrawn by eligible SMEs the Financial Intermediary must pay interest at a commercial deposit interest rate. Could you provide more details regarding how the commercial deposit rate will be calculated and if it will be the same for all selected Financial Intermediary or negotiated separately by each Financial Intermediary and the EIF? 

The commercial deposit agreed between the EIF and FI – what tenor (of a term deposit) is expected, or is it a current account with agreed interest rate?

The Interest Rate is the aggregate rate per annum equal to the Margin plus the Base Rate (typically EURIBOR 3 months)

Typically the Margin (percentage per annum) will be determined by reference to the lowest long term, unsecured indebtedness rating of the bank as follows:

(a)                           1.00% divided by 4 p.a. if above Baa1 (in the case of Moody’s) and above BBB+ (in the case of Fitch and Standard & Poor’s),

(b)                           2.20% divided by 4 p.a. if above Ba1 and below A3 (in the case of Moody’s) and above BB+ and below A- (in the case of Fitch and Standard & Poor’s),

(c)                            4.00% divided by 4 p.a. if above B1 and below Baa3 (in the case of Moody’s) and above B+ and below BBB- (in the case of Fitch and Standard & Poor’s),

(d)                           6.50% divided by 4 p.a. if above Caa1 and below Ba3 (in the case of Moody’s) and above CCC and below BB- (in the case of Fitch and Standard & Poor’s). 

The repayments to EIF will take place on a periodic basis with the interest at a commercial deposit interest rate on the basis of the difference between funds disbursed to the financial intermediary but not yet disbursed to the SMEs. 

Question 10

In Annex 2 the co-financing rate provided by the Financial Intermediary is set at 50% on a loan to loan basis. In Appendix 2 of the EoI under point 1)c) (ee) (i) each applicant must specify the amount of co-financing offered in addition to the JEREMIE funding. Does this mean that the co-financing rate can be higher or lower than the set threshold of 50%?  If yes, would this respectively lead to a change (on a pro rata basis) in the overall interest rate to be charged to the SMEs?  

The co-financing rate is fixed at 50%. The applicant is asked to specify the amount of its own co-financing to be explicitly stated as an amount in EUR.

Question 11

Can you please clarify the information to be submitted in Table 1 below.

Does the candidate provide information about the interest and collateral levels ONLY on the 50% portion funded by the Financial Intermediary’s resources as it is requested in cc) below, or information about the overall levels to be required from  the end user of the loan, the SME? 

The applicants are requested to indicate proposed pricing on the 50% portion funded by the applicant’s resources (as the other 50% funded by EIF will be free of charge).

Since collateral will be shared pro-rata between the Financial Intermediary and EIF, the applicants are requested to provide the proposed level of collateral (after haircuts) for loans to be originated under the Instrument.

Question 12

The description of the programme stipulates:

“The Financial Intermediary further undertakes to originate a new portfolio of SME loans partly funded from the initially disbursed funds”

What is the exact definition of “new portfolio of SME loans”? Does that include new loans made to existing customers? Are new loans made to new customers eligible, if their proceeds are partially used for repayment of other existing loans of the customer?

Are start-up SMEs eligible for financing? Does it depend on the municipality where the start-up SME is registered and/or acting?

All new loans made to existing or new customers are eligible provided that they meet the Eligibility Criteria. However, refinancing, restructuring, and/or partial disbursements of an existing committed loan is not eligible.

Start-ups and existing SMEs throughout all Bulgarian regions are eligible.

Question 13

The description of the programme stipulates:

“Once funds are drawn to SMEs, and hence the risk sharing element is activated, the JEREMIE funds shall be remunerated on the basis of the interest amounts actually paid by the SMEs on the SME loans”

Is our understanding correct, that there will not be such required remuneration for funds, which are disbursed to SMEs? If not – please provide more information on what is the nature of this remuneration and how it should be calculated.

There will be no remuneration due to EIF for funds that are disbursed to SMEs. Therefore, it is expected that the interest rate to be charged to SMEs will be reduced by at least 50%.

Question 14

The description of the programme stipulates:

C. working capital (such as purchase of raw materials, stocks and other manufacturing inputs, labour, inventories and overheads, funding to finance trade receivables, non-consumer sales receivables) related to the establishment, strengthening or expansion of new or existing business activity of an SME on the basis of one of the two following options whichever is applicable to each case: i) a plan for the creation or expansion of an enterprise or, ii) loan application and/or credit documentation, in each case including a description of the SME’s working capital needs; 

Please elaborate more on the two options. Our understanding is that the first option will be used when a working capital loan is coupled with an investment loan. In that regard – is working capital loan for VAT purposes eligible for financing? On the second option – are there any formal requirements for the scope of “loan application and/or credit documentation”, which when completed will be enough to consider the SME loan eligible for financing?

Point (i) can be used not only for situations were a working capital loan is linked to an investment loan. VAT is eligible if it is non-recoverable. 

The standard procedures being implemented by the bank and documentation compiled will be reviewed as part of due diligence to verify that they provide reasonable assurance as to eligibility of a loan. 

Question 15

Financing eligibility

Is a newly originated SME Transaction for financing the expenditures of project under Priority Axis of OP “Competitiveness”, other than Priority Axis 3 an eligible one?

Such a transaction is not an eligible one.

Question 16

Gross Grant equivalent (GGE) and De Minimis clarifications:

Can you provide more detailed information regarding how the “Gross Grant equivalent” is calculated?  

If the interest rate charged by the Financial intermediaries is variable how would De Minimis be calculated in advance when the interest sum to be charged can change with the changing interest rate?

When a loan is restructured or renegotiated the interest amount charged would change respectively. How would a possible breach of the maximum aid to be granted be avoided?

To whom, in which moment and under what form should the Financial intermediary provide information regarding the granted SME loan, hence the grant (state aid) received from the SME?

Please refer to answer 1 further above. 

The gross grant equivalent will be calculated once at the date of signature taken into consideration for its calculation the different parameters (including inter alia the interest rate) as they stand on that date. No recalculation would be required in case of interest rate fluctuation. 

Refinancing, restructuring, and/or partial disbursements of an existing committed loan is not eligible.

The GGE will be communicated to EIF as part of the standard reporting. 

Question 17

Loss Cover

What will be the exact legal framework for the risk sharing component?  Will the bank act as an agent for the EIF, when collecting the collateral?

The Financial Intermediary will be required to realize the collateral, in accordance with their credit and collection policies,  and share recoveries on a pro-rata basis on behalf of EIF. 

Question 18

Reporting
Will EIF provide indicative reporting template? 

The indicative quarterly reporting template for information purposes only is published alongside this set of questions and answers on the EIF web-site. 

Question 19

Disbursement

Can the Financial Intermediary request strictly ex post disbursement, even if EIF accepts ex ante scheme?

What will be the frequency for disbursement/repayment of repaid amounts from the SMEs – one month, three months, six months? 

It is not clear what do you mean by “based on actual utilization”.

These elements will be discussed between the applicant and EIF in the course of the contractual negotiation process. EIF will decide based on the financial standing of the FI whether funding will be provided ex-ante or ex-post. A standard disbursement/repayment frequency is typically either on a monthly or quarterly basis. 

Financing will be made available in tranches, in accordance with:

-      The SME loan portfolio origination volumes (i.e. utilisation of outstanding tranches);

-      A minimum tranche amount;

-      A maximum tranche amount;

-      Minimum frequency of drawdown request. 

Question 20

Interest rates

Please provide more information on the scope and level of detail of the information to be provided on the interest rates. 

Can Financial Intermediaries offer both fixed and variable interest rates for the SME loans? 

What is the used definition of Base rate? 

If variable rates are eligible, is there a restriction on the used benchmark (Sofibor, Euribor)? 

If variable rates are eligible – how should the min and max values be represented? 

Both fixed and variable interest rates can indeed be offered. 

Base rate is the offered quotation to leading banks in the Euro-zone interbank market ("EURIBOR EUR") or Bulgarian interbank market (“SOFIBOR”). 

As variable rates are indeed eligible, please report the minimum and maximum margins to be offered through this programme. 

In all cases, please feel free to make clarifying remarks in your application in any point you deem fit. 

Question 21

Tenor of the sub-loans

Is there any restriction on the maturity of SME loans? What does the availability period (up to 31.12.2015) restrict? 

The loan term is between 12 and 120 months (including grace period).

The availability period is limited to maximum 36 months. The bank has to provide the agreed volume of new loans to SMEs during the availability period. The last potential date (in case an agreement is signed on 1 January 2013) with a 36 months Availability period would be 31 December 2015. In other words, the last disbursement to an SME has to occur before end of 2015. 

Question 22

Information on the Applicant’s IT systems

Could you elaborate more on the scope and level of detail of the information that is required?

IT architecture and IT systems are very complex and detailed description of the entire IT system architecture and specifications (core system, back-up center, satellite systems: Card management system, Web banking, etc.) may be time-consuming to provide and evaluate. 

Please provide a high level description of the IT system in place and its use in the process of loan origination and monitoring. 

Question 23

Confidentiality

Is there an option for signing a confidentiality agreement between the Financial intermediary and the JHF? 

The contractual agreements will be between the Financial Intermediary and EIF not the JEREMIE Holding Fund which is a separate legal entity.

The applicant may request a signature of a confidentiality undertaking between EIF and the applicant prior to entering into a contractual agreement. 

Question 24

Is the limit provided by JEREMIE Holding Fund (JHF) revolving?

It is a non-revolving facility. 

Question 25

The approval for granting SME loan is entirely given by the Financial Intermediary (FI) or together with JFH?

The credit decision is entirely delegated to the bank. The inclusion of loans in the portfolio will be a sole decision of the financial intermediary based on its standard credit and collection policies and practices. SME loans will have to meet the eligibility restrictions explicitly mentioned in the contractual agreement.

Question 26

The FI repays only the granted principal to JHF or including the part of the interest amount actually paid by the SME?

The financial intermediary is obliged to repay any risk sharing portion of principal repayments of the SME to EIF. No interest payments related to disbursed SME loans shall be provided as the EIF portion will carry 0% interest for SMEs.

Question 27

As JHF interest rate is 0%. In case the client is paying the due instalment, first the FI covers the due fees, then due interest and then pro rata the principal or the received funds are initially pro rata distributed?

Any repayment of principal shall be shared pro-rata with EIF.

Question 28

Do the repayments of the funds granted by JHF coincide with the repayment schedules under each SME loan granted by the FI?

The repayments of the funds granted by EIF will follow the repayment of principal SME loan. The repayments to JHF will take place on a periodic basis to be mutually agreed upon. 

Question 29

Could be SME eligible for financing if it is with local registration, but with foreign ownership? (Section eligible SMEs and transactions)

Regardless of ownership of the company, the only restrictions are: it should be established under the Bulgarian Commercial Act or Co-operations Act and operate in Bulgaria – it should also qualify as an SME (provided that it meets the SME Definition).

Question 30

Shall the loans co-financed by JHF be newly originated loans or could be refinancing existing loans of the FI? (Section Eligible SMEs and transactions)

Refinancing, restructuring, and/or partial disbursements of an existing committed loan is not eligible.

Question 31

Does starting enforcement procedure under SME loan co-financed by JFH requires preliminary approval of JHF?

The bank shall start enforcement action in line with its credit and collection policy. No prior approval of the JHF is required.

Question 32

What are the prepayment clauses? (Section Disbursement under the OA)

An operational agreement may typically include provisions which:

(i)       at the date which falls 6 months after the end of the availability period, will oblige the financial intermediary to repay to EIF any amounts drawn under the facility which have not been committed to SME (by way of a signed loan agreement entered) as of such date; and

Question 33

Shall all securities under each SME loan established in favour of FI?

The normal practice of the FIs will not change. Proceeds following enforcement of the security under a SME loan will be shared with EIF.

Question 34

Can we get a draft text of the “Operational Agreement”?

The Operational Agreement will be provided to pre-selected applicants. 

Question 35

The proposal template attached (Annex 1) must be prepared in what format – Word doc, PDF, other? Can we attach additional material, such as corporate/group presentations?

Kindly provide the information in either word or pdf format.

Feel free to attach any material that you deem suitable.

The word version of Annex 1 has been attached at the web-site of the call.

Note that there are strict requirements on the submission of the documentation within the call including both a hard copy and electronic versions.

Question 36

Is there a required/expected time line or deadline for the FI to implement the financial engineering instrument?

The build-up of the portfolio should take place within the availability period. It is expected that first loans will be provided within a few weeks after an operational agreement has been signed.

Question 37

Can we see the specific implementation rules for the separate block of finance within the FI where the financial engineering instrument will be implemented?

Any implementation aspects will be mutually agreed and regulated by the operational agreement between the financial intermediary and EIF. SME loans included under this programme need to be clearly identified in the banks’ systems.

Question 38

Can FI express interest for a contribution for amount larger than JHF contribution, i.e. co-financing more than 50%?

The co-financing rate will be fixed at 50%.

Question 39

Is there a minimum capital allocation expected from one FI?

There is no minimum capital allocation expected from one applicant – the applicant is expected to set the target volume of the portfolio according to its utilisation potential.

Question 40

How is the indicative initial capital allocated to FI changed, if needed?

EIF intends to allocate the full amount under this product to financial intermediaries. The resources allocated to a given financial intermediary will be contractually determined and will, in principle, not be subject to change. There will be interim utilisation targets established throughout the availability period and failure to reach those can result in the termination of availability period, hence cancellation of any amounts committed under the agreement. 

Question 41

Documents originally in languages other than English, should be translated to English in what form – by FI experts, certified translator with MoExterior apostle, or other?

Translation of official documents by the financial intermediary will suffice.

Question 42

When is the second step of the selection process (due diligence process) expected to happen?

The applicants that are shortlisted for the due diligence process will be requested to provide additional information as stipulated in the Call (p.17). Typically, such information needs to be provided within 2 weeks to EIF. A few days thereafter the first due diligence with a pre-selected applicant could be arranged.  Further stages of the selection process shall be completed in the course of Q4 2012.

Question 43

Is there a minimum collateral coverage or LTV ratio required for the newly originated SME loans? Can FI offer unsecured loans?

The financial intermediary will be required to follow its standard procedures and credit guidelines in assessing each loan application to be included in the JEREMIE portfolio.

In principle, unsecured loans are not excluded from the scope of the programme.

Question 44

Is FI expected to transfer any interest amounts actually paid by the SMEs on the SME loans?

Interest repayments of the SME will correspond to the financial intermediary interest only as the JHF portion will carry 0% interest.

Question 45

Are there any preferred industry sectors to which FIs must focus new loan origination (in addition to restricted industries described in Annex 2)?

There are no preferred industry sectors; the portfolio to be built up under JEREMIE is expected to reflect the bank’s current portfolio composition and ensure sufficient diversification.

Question 46

In the “Risk sharing arrangements”, are interest amounts loss included, i.e. is EIF’s liability for coverage of losses extending to interest amounts accrued but not collected?

EIF is sharing losses on principal only.

Question 47

How do you determine “adequate marketing and publicity campaigns”? Please clarify “adequate”?

Adequate to reach the target market of the programme and in line with the capacity of the financial intermediary.

Question 48

Must “Current pricing and collateral policy for comparable loans to a similar target group” described on the level of Investment loans and Working Capital loans (as indicated in Table 1), or at more detailed, product by product, level?

The applicant is expected to present a split between investment and working capital loans as requested in Table 1.
Should there be an additional split available, please enclose it in addition to completion of Table. 

Question 49

Are there any format requirements for the documents to be submitted under point (2) of Annex 2 List Of Documents Attached (Information on the Applicant’s IT systems, reporting mechanisms, monitoring procedures and controls)?

It is to the discretion of the applicant to decide how to present the information to cover this point in an optimal manner.

Question 50

Must “Certified copy of banking license” and “evidence of the representative’s authorization” be translated in English and legalized (with Ministry apostile), or FI translation is sufficient?

Translation of official documents by the financial intermediary will suffice.

Question 51

Is it necessary/obligatory for the Applicant to authorize explicitly specific person – employee, attorney etc. with the right only to submit the Expression of Interest or is it possible the submission to be executed by the legal representatives – the Executive Directors of the Applicant ?

Any person, who is authorised signatory for the applicant can sign the application. However, EIF should dispose of adequate proof (list of authorised signatures) of the signature and the power to bind the applicant. It must not be forgotten that the application constitutes a binding offer and therefore must be signed by a person, who is authorised to bind the applicant.

An official list of authorised signatures is sufficient, otherwise a confirmation of the signature power by the corporate secretary or the head of legal.

Question 52

What exactly means “certified copy”? 

This relates to an official copy of banking license or other requisite license or, if not available, other proof of the Applicant’s authorisation allowing for the implementation of the Financial Instrument in Bulgaria.

Question 53

Could you please clarify the following requirements: "base rate" and "of which risk-related margin (bp)"?

Base rate is the offered quotation to leading banks in the Euro-zone interbank market ("EURIBOR EUR") or Bulgarian interbank market (“SOFIBOR”).

The line marked “of which risk-related margin” relates to the risk related margin which is included in the overall interest rate to be applied to the loans of the programme and which is presented two lines above in the same table.

Question 54

Are there any requirements for collaterals which are to be provided by the Financial Intermediaries for the used funding?

On the basis of the EIF's assessment of the counterparty risk of the selected Financial Intermediary (as concluded during the evaluation/due diligence process), the EIF will request appropriate financial covenants and undertakings by the selected Financial Intermediary under the Operational Agreement.

The EIF reserves the right to determine the collateral or risk mitigants to be provided by the selected Financial Intermediary under the Operational Agreement, including, subject to local law requirements, rating triggers, pledges or negative pledges and assignment of underlying loans

Question 55

Are there any restrictions of the maximum amount of the projects?

The only maximum amount restriction relates to the calculation of the gross grant equivalent – please refer to question 1. EIF can also take commercial restriction on the maximum loan amount as % of the agreed portfolio volume.

Question 56

Could you please detail the step-by-step disbursement process in case of ex ante draw-down?

The ex-ante draw-down process will take the form of a payment request from the financial intermediary further to certain conditions precedent being met – these will be discussed with the financial intermediaries during the due diligence phase.

Question 57

Is there a minimum tranche amount and what is it?

There is a minimum tranche amount – the tranches sizes will be set after EIF assessment.

Question 58

How shall the Interest due be calculated more specifically?

Interest will be calculated on funds that are disbursed to a financial intermediary but not disbursed to SMEs and on funds recovered/repaid to the financial intermediary but not yet repaid to JHF.

More specifically a typical structure will provide for: 

Facility amounts advanced to the Borrower but not yet disbursed to SMEs. 

The operational agreement provides for interest to accrue on amounts disbursed by the EIF but which the financial intermediary has not yet applied in the financing of SME Loans at an interest rate to be specified in the agreement. Interest at this rate is to be paid to EIF on each payment date (i.e. 7 January, 7 April, 7 July and 7 October in each year) for the preceding calendar quarter. 

Amounts repaid by SMEs to the financial intermediary and not yet repaid to EIF. 

The operational agreement has built into it a delay between the receipt of monies by the financial intermediary which should be paid on to the EIF, and actual payment of those monies to the EIF. The agreement provides for interest to accrue on those amounts at an interest rate to be specified and for that interest to be paid on each payment date to the EIF.