Companies will be able to defer payments on the loan principal for up to six months
The Finance Latvia Association, in cooperation with its members, has continued its work on support instruments for bank customers experiencing short-term financial difficulties due to the COVID-19 outbreak. In addition to the moratorium for private individuals, there has been worked out a moratorium for companies, which provides for the possibility to defer repayment of the loan principal for up to six months.
The moratorium applies to legal entities and other performers of economic activity who are not self-employed. According to the moratorium, there may be made changes in the payment schedule of the loan principal, if the loan agreement provides for repayment of the principal amount in instalments. At the option of the customer, repayment of the principal amount may be postponed fully or partially for a period of up to six months, as specified in the moratorium. During this period, the customer must continue to pay interest, insurance premiums and other non-principal payments provided for in the loan agreement. No additional collateral or increased interest rate will be applied.
In accordance with the terms of the moratorium, repayment of the principal loan amount may be deferred once only. The commission fee for making amendments to the agreement within the framework of the moratorium will be applied only in the amount necessary to cover the costs of preparing the amendment documentation.
According to the moratorium, a company will be able to receive a deferral of the principal amount of liabilities if it did not have financial difficulties before 12 March 2020 or there exist no insurmountable obstacles to repaying the loan.
A company can apply for a moratorium provided that the company's equity, as at the end of the last closed financial year, was positive and the loan payments were not delayed for more than 30 days during the year, starting from 12 March 2019. The customer will be required to specify for the financial institution what is the exact reason for the deterioration in the financial situation in connection with the COVID-19 pandemic.
The moratorium does not apply to a company whose principal activity is gambling. The moratorium also does not apply to a company that has been declared insolvent, bankrupt or has been the subject of legal protection proceedings. Nor shall it apply to a company with which the business relationship has been terminated in accordance with the provisions on the prevention of money laundering, terrorist or proliferation financing or on the compliance with international financial sanctions.
The moratorium shall enter into force on 5 May 2020. The customer shall apply for a deferral of the principal amount by 12 June 2020 and the financial institution shall make decision by 30 June 2020.