EU Projects

1. Borrowers

Private sector business entities - companies, crafts businesses, sole traders, family farms, cooperatives, institutions and associations
Public sector business entities - units of local and regional government (municipalities, cities and counties - hereinafter: ULRGs) and companies, institutions and agencies owned or majority-owned by ULRGs and/or the Republic of Croatia

that meet the requirements of the tender for grants financed from the budget of the European Union and/or national sources and other foreign public sources.

2. Purpose of Loans

All eligible and ineligible expenses of the project (including the costs not included by the borrower in the application to tender that are an integral part of the project), where a maximum of 30% of the total loan can be approved for working capital that is not in the category of eligible expenses

3. Manner of Implementation

Via commercial banks or under the risk-sharing model - loan application and related documentation shall be submitted to the commercial bank
Direct lending (except for family farms that are not within the VAT system and associations) - loan application and related documentation shall be submitted to HBOR
- Note: it is possible to issue an advance payment guarantee (in such case, the application for guarantee is submitted together with the loan application)

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;

Maximum loan amount depends on the specific features and creditworthiness of the borrower, purpose and structure of investment as well as available HBOR’s sources of finance. The following can be financed:

Private sector entities: up to 75% of the estimated investment value, VAT not included*, whereby HBOR can accept as the borrower’s own funds up to 70% of the amount that the borrower will obtain through a grant (if the loan is approved via commercial bank, the commercial bank will determine the borrower’s own funds)
Public sector entities: up to 100% of the estimated investment value (it is also possible to finance the VAT, except for loans with interest subsidy from the NRRP** funds).

*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 from the NRPP funds.
**NRRP - National Recovery and Resilience Plan

5. Loan Currency

EUR

6. Interest Rate

Interest rate
On loans to ULRGs and institutions and agencies majority-owned by them as well as on loans to other public sector entities approved at 100% guarantee of the Republic of Croatia or ULRGs: 3.2% per annum, fixed on direct loans commercial banks determine interest rates on their own on loans approved through commercial banks
To other borrowers: minimum 4.57% per annum, fixed

Interest rate

On loans to ULRGs and institutions and agencies majority-owned by them as well as on loans to other public sector entities approved at 100% guarantee of the Republic of Croatia or ULRGs:

3.2% per annum, fixed

on direct loans

commercial banks determine interest rates on their own

on loans approved through commercial banks

To other borrowers:

minimum 4.57% per annum, fixed

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
- To borrowers with loans in the amount of EUR 5 million and above, HBOR determines the level of interest rate for each individual loan.

*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 from 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, provided that combining with Financial instruments under the NRRP is not prohibited by the relevant conditions of the tender for grants and related documentation, and that restrictions from the aid regulations are complied with by the financing. 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:
  - Loans to ULRGs, institutions and agencies majority-owned by them as well as on loans to other public sector entities approved at 100% guarantee of the Republic of Croatia and/or ULRGs: 3.20% p.a., fixed
  - Other borrowers: at least 4.57 % p.a., fixed
  - 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 loan

Part of the regular interest rate is subsidised by HBOR, in its own name and for the account of the Republic of Croatia
Investments of the private and the public sectors in green and/or digital transition	Interest rate reduction of up to 75% of the regular interest rate, but to a maximum of 3.00 percentage points
Investments of the private and the public sectors in special areas of the Republic of Croatia and/or RDI (research, development, innovations) and/or investments of the public sector aimed at recovery from the consequences of earthquake***	Interest rate reduction of up to 65% of the regular interest rate, but to a maximum of 3.00 percentage points
Other investments of the private sector in competitiveness and resilience or the public sector in strengthening sustainability and quality of public infrastructure	Interest rate reduction of up to 50% of the regular interest rate, but to a maximum of 3.00 percentage points

The maximum possible amount of subsidised interest for an individual loan is:

EUR 500,000.00 for micro, small and medium enterprises of the private sector
EUR 1,000,000.00 for Mid-caps and large private sector entities, and for public sector entities.

*NRRP - National Recovery and Resilience Plan
**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.
***Recovery from the consequences of earthquake includes investments by public sector entities aimed at rehabilitating, eliminating and/or reducing the consequences of earthquake (includes the reconstruction of existing and construction of new buildings, infrastructure etc. damaged or destroyed in earthquake).

8. Fees

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

Loan application processing fee:
- To ULRGs and institutions and agencies majority-owned by them: 0.20% on the contracted loan amount;
- To other borrowers: 0.50% on the contracted loan amount.
Commitment fee:
- To public sector entities: no fee
- To other entities: 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.

9. Period and Manner of Loan Disbursement

Generally, up to 18 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 or, as an exception, to the special/project account opened for the realisation of the financed project 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 the loan for earmarked purposes
For loans approved directly by HBOR, it is possible to disburse the loan before the conclusion of the financing contract relating to grant award, if the borrower has available funds from own resources (grants do not represent own funds) for the completion of the funding plan
For loans approved via commercial banks, the loan disbursement is possible before the conclusion of the financing contract relating to grant award, about which the decision is made by the commercial bank

10. Repayment Period

Up to 15 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 units of local or regional government, entities majority-owned by units of local or regional government or the Republic of Croatia: up to 15 years, including up to 5-year grace period,
For investments in tourism or if the investment study indicates the need for longer maturity and/or grace period: up to 17 years, up to 4-year grace period included.

11. Manner of Repayment

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

HBOR reserves the right to contractually determine with the borrower that the borrower shall, after the project completion, use the received grant that has not been utilised for the project investment to reduce the unrepaid loan principal, which shall not be considered the premature, but regular loan repayment.

12. Collateral

Public sector entities:
- Financing of ULRGs is possible if secured only with a bill of exchange and a debenture, depending on the assessment of HBOR and/or the commercial bank
- For loans to other public sector business entities:
  - 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, bank guarantees and other security instruments customary in banking operations), and the risk assessment of the investment and the borrower.

Private sector entities:
- 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, 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/
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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.