Non-repayable loans: guide to facilities 2015/16

In the vast universe of non-repayable loans, it can very often happen to come across expressions such as “interest rate subsidy” or “capital contribution”. These are categories that are part of subsidized loans.

Interest or capital contributions: the differences

We know that non-repayable loans are those loans in which the lender has an interest in considering the latter as incentives to benefit companies or workers in a given sector: the loans are therefore treated as a real investment, where the beneficiary is not expected to repay the principal or that any refund will be subject to interest.

And this is where the differences lie, which determine the division into categories such as interest subsidies or capital grants. An interest rate subsidy is a financial concession granted by an institution in concert with financial institutions to help develop a business project with medium or long-term financing. This facility can provide for a very low interest rate, with disbursement in several distinct phases. It is, in short, a sort of repayment (obtained in advance) of the interest accrued from the financing by a bank.

An interest subsidy is never the same for everyone, but it depends on the notices of the individual providers and is equal to the overall amount of interest calculated at a rate set periodically by the European Commission. In the case of contributions granted by the Ministry of Economic Development, for example, the rate is 2.75% on a conventional amortization plan, so that a company that has applied for a loan of 60 thousand USD will get an interest rate contribution of $ 4,630.

On the other hand, the capital contribution is different, since being partially non-repayable, it does not provide for any refund by the company or by the applicant, on all or some investments. This means that in the capital grants, after viewing a candidate’s business plan, the provider can decide to finance part or all of the future investments of the company, without obligation to repay, on a percentage basis of the eligible expenses. Expenses must obviously all be duly documented through invoices paid by suppliers “.

Who can request them: all recipients

Not everyone can apply for non-repayable loans, either as interest or capital grants, but only certain types of recipients. They generally consist of:

  • Certain categories of people (like young people under 36, women, unemployed) who plan to start a business;
  • Activities already started, but operating on economically or socially disadvantaged territories;
  • Activities aimed at digitalization, modernization of machinery and export drive;
  • Those who intend to start a start-up (see also subsidized financing for start-ups) or a micro-enterprise (even if only one person);
  • Those who intend to start a micro enterprise, a company or an SME in a disadvantaged territory or in an economically depressed region;
  • Companies (also networks of companies, consortia) that need financial aid to continue operating.