Business News

Construction Sector to Benefit from State Guarantees

Ljubljana, 28 July (STA) - The government on Thursday changed the investment financing state guarantees act to allow companies to get state guarantees also for working capital loans when applying for public tenders or when acting as suppliers in such tenders.

Finance Minister Franc Krizanic told the press that the government decided to prepare the proposal because of the poor condition of Slovenia's construction sector and construction companies' difficulty in bidding for public contracts.

The guarantee will enable capital adequacy, Krizanic said. The proposal is for the guarantee for working capital loans to cover 60% of the principal if the share of capital in total assets is at least 35%.

If lower, the guarantee would cover 40% of the principal. Krizanic said that the funds would be limited at EUR 700,000, but would be renewed to up to EUR 10m.

The quota for guarantees would amount to EUR 1bn, of which EUR 750m is earmarked for investments and the rest for working capital. A single loan for working capital will be capped at EUR 750,000.

A company's combined secured loans will be capped to EUR 10m and once a guarantee is secured, the company will be submitted to supervision by a trustee of the Finance Ministry who will check on the use of loans gained through the guarantee.

Moreover, the company's management will have to back 50% of each loan obtained through a guarantee with their personal assets or a security clause.

"We would like to prevent abuse and boost the capital adequacy of Slovenian construction companies when applying for big public tenders at home or abroad," Krizanic told the press.

Should the company that has obtained a guarantee prove to have less than 35% of its assets in capital, it will have to prepare a plan for capital restructuring or a plan for capital raising.

Krizanic moreover said that the government has adopted a set of regulations for commissioning construction services or services connected to construction aimed at preventing dumping prices in the sector.

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