Brazil’s Government Announces R$15.9 Billion in Loans for Small Businesses

11RIO DE JANEIRO, BRAZIL – The Ministry of Economy announced on Wednesday, June 10th, that the Operations Guarantee Fund (FGO) would release R$15.9 billion from the National Treasury in loans to small businesses, as a means to mitigate the economic impact of the crisis caused by the Covid-19 pandemic. The credit facility is part of the National Program to Support Microenterprises and Small Businesses (PRONAMPE).

The announcement came during an event in the Planalto Palace, and was made jointly by the Ministry of Economy, Federal Treasury and the Bank of Brazil, the fund manager.

“Our main concern now is to enable credit for companies,” said Carlos da Costa, Secretary of Productivity, Employment, and Competitiveness. “This is the moment when working capital is the most important.”

The estimate is that loans could reach 4.5 million micro- and small businesses, according to the Ministry. Individual micro-entrepreneurs (MEI) may also benefit.

According to the government, there will be a 100 percent collateral for each operation, up to the limit of 85 percent of each lender’s outstanding loan portfolio.

The amount released will represent up to 30 percent of each company’s annual gross revenue, in an estimate based on the 2019 fiscal year. The maximum annual interest rate will be equal to the SELIC – the treasury interest rate, currently at three percent per year – plus 1.25 percent on the principal, with a 36-month term for payment and an 8-month grace period for payments of principal and interest.

“It is virtually risk-free for the financial institutions,” Costa said.

The companies taking out the loan must commit to preserving their workforce from the date the loan is disbursed to them,until at least 60 days after making the last installment payment, according to the government.

The loan can be applied for in public and private banks, cooperatives, and credit unions. “The involvement of state development banks, cooperative banks, institutions belonging to the Brazilian Payment System, fintechs and civil society organizations of public interest of credit is also allowed,” says the official note.

Companies will be notified about the loan

All Brazilian micro and small businesses will be notified by the federal government by June 15th about the availability of FGO resources, according to José Barroso Tostes Neto, Federal Revenue Secretary.

According to him, 273,000 notices were issued on Tuesday, June 9th. On Wednesday, another 1,763,000 notices were issued, a number to be repeated on Thursday. After that, another 780,000 notices will be sent by Monday, June 15th.

Thus, all 4.58 million micro and small businesses will be notified, said the Secretary, “to seek eligibility from financial institutions”.

Carlos Motta, vice president of the Bank of Brazil, said 12 financial institutions have already started the qualification process to use FGO funds.

Among these, three are large banks, two are cooperative banks, two are large fintechs and the remainder are development agencies and development banks, according to Secretary Carlos da Costa. “We hope that the number starts growing and the procedures will be completed soon,” he said.

Source: Estadão Conteúdo