Private Sector Investment

The Croatian Bank for Reconstruction and Development (HBOR) informs its clients that as of 23 September 2024, due to the fact that the funds have currently been exhausted, the receipt of applications for interest rate subsidies has been suspended under the National Recovery and Resilience Plan (NRRP) for the private sector, i.e. for loans to micro, small and medium-sized business entities and for loans to entities of medium market capitalisation and large business entities.

All information about the continuation of subsidised lending under the NRRP will be provided on HBOR’s website in due time.

1. Borrowers

Private sector business entities - companies, crafts businesses, sole traders, family farms, cooperatives and institutions.

For the purpose of recovery from the consequences of earthquake and for stimulating the economic development of Sisak-Moslavina County - business entities of the private and public sectors that operate or will operate in Sisak-Moslavina County*.

*HBOR may also consider loan applications for recovery from the consequences of earthquake of business entities from the private and public sectors operating in Zagreb and Karlovac counties.

2. Purpose of Loans

Investments in fixed assets (tangible and intangible assets) for the purpose of business modernisation, introduction of new technologies, increase in capacities, investments in research and development and introduction of new products or services, promotion of environmental protection, energy efficiency and renewable energy resources projects, tourist capacities and facilities as well as promotion of new employment
Investments in fixed assets (tangible and intangible assets) for the purpose of recovery from the consequences of earthquake and for stimulating the economic development of Sisak-Moslavina County^*
Working capital: up to 30% of the contracted loan amount

Within the framework of this programme, HBOR may consider approval of loans to exporters registered in the Republic of Croatia for the purpose of expanding and internationalising business in the area of its predominant activity with the following purposes:

Purchase of business shares, where the assessment of acceptability in direct lending is based primarily on exporter's creditworthiness.**
Capital investment in a foreign company (purchase of machinery and equipment and/or refurbishment/reconstruction of business premises), where the exporter registered in the Republic of Croatia has a majority business share in the foreign company.**

*HBOR may also consider loan applications for recovery from the consequences of earthquake of business entities from the private and public sectors operating in Zagreb and Karlovac counties.
**The following is not acceptable: purchase of a business share from a connected client in terms of ownership. Neither purchase of a business share nor a capital investment in a company with the headquarters in: - a country or region against which or against whose government the sanctions programmes implemented by relevant competent authorities are directed; - to a country that is considered an offshore financial centre. This includes but is not limited to: - countries that finance or support terrorist activities or within which terrorist organisations operate; - countries that are on the EU’s list of non-cooperative jurisdictions for tax purposes.

3. Manner of Implementation

In cooperation with commercial banks via commercial banks or through risk-sharing model - application and related documentation shall be submitted to the commercial bank by the borrower

Direct lending to borrowers (except family farms that are not within the VAT system and associations) - application and related documentation shall be submitted to HBOR by the borrower

4. Loan Amount

Minimum possible individual loan amount:

HBOR’s direct loans: generally, loans in the amount lower than EUR 100,000 are not approved;
Loans on-lent via commercial banks: generally, loans in the amount lower than EUR 50,000 are not approved;
Loans approved under the risk sharing model with commercial banks: HBOR’s share in a loan can generally not be lower than EUR 100,000;
Loans for the recovery from the consequences of earthquake and for the economic development of Sisak-Moslavina County: minimum loan amount is EUR 30,000

The maximum loan amount is not limited and depends on the specific features and creditworthiness of the borrower, purpose and structure of investment as well as available HBOR’s sources of finance. It is possible to finance up to 75% of the estimated investment value, VAT not included*

For loans intended for the recovery from the consequences of earthquake and for the economic development of Sisak-Moslavina County:
- minimum loan amount is EUR 30,000
- maximum loan amount can be up to 100% of the estimated value of investment, including VAT (except for loans with interest subsidised under the NRRP** funds), provided that financing of VAT for the borrowers that operate within the VAT system is possible only through the award of de minimis aid. In such a case, VAT has to be allocated to working capital in the breakdown of investment contained in the loan application;

For loans with the purpose of purchasing a business share in a foreign company: the maximum amount of the loan is not limited, but depends on the specific features and creditworthiness of the borrower as well as the available sources of HBOR finance

*HBOR can consider financing of the estimated investment value, VAT included, if the borrower delivers goods or provides services that are excluded from the VAT calculation or for the borrowers not operating within the VAT system, except for loans with interest subsidy under the NRRP funds.

**NRRP - National Recovery and Resilience Plan

5. Loan Currency

EUR

6. Interest Rate

Interest rate	Possibilities of reduction	Criteria
3.40 % p.a., fixed for business entities investing in activities of special interest* that are market competitive, or business entities investing in special areas of the Republic of Croatia that are market competitive*	- 0.2 percentage point	for youth employment
	up to - 2 percentage point	with subsidy granted by County / City / Municipality
3.90 % p.a., fixed for other business entities	- 0.2 percentage point	for youth employment
3.90 % p.a., fixed for other business entities	up to - 2 percentage points	with subsidy granted by County / City / Municipality
2% p.a., fixed for business entities investing in the recovery from the consequences of earthquake and for economic development of Sisak-Moslavina County	- 0.2 percentage point	for youth employment
	up to - 1 percentage points	with subsidy granted by County / City / Municipality

In certain cases, interest rate can be even higher as follows:

To borrowers that perform business activity and cannot obtain state aid and/or de minims aid, effective interest rate (EIR)** cannot be lower than the reference interest rate for a single borrower (RIR)***, all in accordance with the regulations on the award of state aid
In the case of on-lending through a commercial bank to borrowers with loans in the amount of EUR 5 million and more an, irrespective of the amount for loans with the purpose of purchasing a business share in a foreign company or with the purpose of investing in a foreign company, the interest rate is determined by the bank in accordance with its internal documents
In the case of direct lending:
- to borrowers for loans of EUR 1 million and more, and,
- irrespective of the amount, for loans with the purpose of investing in a foreign company

the interest rate is determined by HBOR for each individual loan.

*Criteria for defining market competitive business, Activities of special interest entities and Special areas of the Republic of Croatia can be found in the General Eligibility Criteria, which are a constituent part of this loan programme.
**Effective interest rate (EIR) is an interest rate that shows total costs of a loan in accordance with the valid Decision on Effective Interest Rate of the Croatian National Bank.
***Reference interest rate (RIR) is the base rate (calculated and published by the European Commission), increased by a certain number of basis points (margin) that depend on the client’s rating (credit rating) and the assessment of collaterals, in accordance with the Communication from the Commission on the revision of the method of determining reference and discount rates (OJ C 14, 19.1.2008). It is applied for the calculation of aid in loans approved with promotional interest rates. The range of valid RIR is available in the Information on Base and Discount Rates and Reference Rates.

7. Interest rate for loans with subsidy under the NRRP funds*

For borrowers and loans that meet the conditions prescribed by the Operational Programmes for the Implementation of Financial Instruments under the NRRP, part of the regular interest rate is subsidised by HBOR in its own name and for the account of the Republic of Croatia as follows:

For investments in green and/or digital transition: up to 75% of regular interest rate, but to a maximum of 3.00 p.p.
For investments in special areas of the Republic of Croatia and/or RDI (research, development and innovation): up to 65% of the regular interest rate, but to a maximum of 3.00 p.p.
For other investments in competitiveness and resilience: up to 50% of the regular interest rate, but to a maximum of 3.00 p.p.

Whereby the regular interest rate is determined as follows:

In the case of on-lending through a commercial bank, the interest rate is determined by the bank in accordance with its internal documents
In the case of direct lending to a borrower:
- On loans in the amount lower than EUR 400,000:
  - Business entities investing in the recovery from the consequences of earthquake and in the economic development of Sisak-Moslavina County: 2.00% p.a., fixed
  - Business entities that are market competitive** and invest in activities of special interest, or are market competitive and invest in special areas of the Republic of Croatia**: 4.00% p.a., fixed
  - To other business entities: 4.50% p.a., fixed or
  - At the level of reference interest rate (RIR)*** for an individual borrower if it is higher than the interest rates referred to in the above indents
- On loans in the amount of EUR 400,000 or above: HBOR determines the interest rate for each individual loanThe highest possible amount of subsidised interest for a single loan is:

The highest possible amount of subsidised interest for a single loan is:

EUR 500,000.00 for micro, small and medium-sized enterprises
EUR 1,000,000.00 for mid-caps and large enterprises.

*NRRP - National Recovery and Resilience Plan
**Criteria for defining market competitive business, Activities of special interest entities and Special areas of the Republic of Croatia can be found in the General Eligibility Criteria, which are a constituent part of this loan programme.
***Reference interest rate (RIR) is the base rate (calculated and published by the European Commission), increased by a certain number of basis points (margin) that depend on the client’s rating (credit rating) and the assessment of collaterals, in accordance with the Communication from the Commission on the revision of the method of determining reference and discount rates (OJ C 14, 19.1.2008). It is applied for the calculation of aid in loans approved with promotional interest rates. The range of valid RIR is available in the Information on Base and Discount Rates and Reference Rates.

8. Fees

Variable, in accordance with the Ordinance on Fees for HBOR Services valid on the day of calculation:

Loan application fee: 0.50% on the contracted loan amount*
Commitment fee: 0.25% on the contracted undisbursed loan amount**

and other fees in accordance with the Ordinance on Fees for HBOR Services valid on the day of calculation.

On loans intended for the recovery from the consequences of earthquake and for the economic development of Sisak-Moslavina County:

no loan application processing fee
no commitment fee
no fee for changing the terms and conditions of loan

and other fees in accordance with the Ordinance on Fees for HBOR Services valid on the day of calculation.

Loan application processing fee is not charged on direct loans under NRRP guarantee*.

*Financial Instrument: Guarantee Fund for Loans to Mid-Caps and large business entities.

9. Period and Manner of Loan Disbursement

Generally, up to 12 months. Depending on the purpose and the dynamics of investment, it is also possible to approve a longer period of loan disbursement
Part of the loan intended for the financing of fixed assets is disbursed to the account of seller/supplier/contractor based on the documentation for utilisation of loan for earmarked purposes
Part of the loan intended for the financing of working capital can be disbursed to the account of the borrower, with obligatory justification by documentation evidencing the use of loan for earmarked purposes
For loans intended for the recovery from the consequences of earthquake and for the economic development of Sisak-Moslavina County, it is allowed to make a refund for borrowers’ investments made after the earthquake, until the submission of loan application (for such a refund, commercial banks are not obliged to notify HBOR in advance).

10. Period of Repayment

Up to 14 years, with up to 3-year grace period included, depending on the purpose and structure of investment

As an exception to the mentioned, depending on the purpose and structure of investment, it is possible to approve the following repayment and grace periods:

For the planting and/or restructuring of perennial crops in agriculture: up to 15 years, including grace period of up to 5 years
For investments in tourism or if the investment study indicates the need for longer maturity and/or grace period: up to 17 years, including grace period of up to 4 years.

11. Manner of Repayment

Generally, in equal monthly, three-monthly or semi-annual instalments

12. Collateral

Lending in cooperation with commercial banks: collateral is determined by the commercial bank
Risk sharing model: collateral is determined by the commercial bank and HBOR
Direct lending: HBOR agrees the collateral with the borrower in accordance with HBOR’s internal documents (e.g. bills of exchange, debentures, pledge of property with insurance policy for the property endorsed in favour of HBOR, pledge of business shares, bank guarantees, guarantees of HAMAG-BICRO and other security instruments customary in banking operations), and the risk assessment of the investment and the borrower

13. Related Documentation / Schedules

14. Others

In the implementation of financial instruments, the beneficiaries of EU funds and other third parties that provide information on EU programmes use the emblem of the EU with the funding statement in the following wording: “Funded by the European Union - NextGenerationEU” available at the link: https://ec.europa.eu/regional_policy/en/information/logos_downloadcenter/
Sample generator: https://www.euinmyregion.eu/generator

The views and opinions expressed are solely those of the author and do not necessarily reflect the official views of the European Union or the European Commission. Neither the European Union nor the European Commission can be held responsible for them.