PFR Financial Shield for micro-enterprises and SMEs

From April 29th, entrepreneurs struggling with the effects of the economic lockdown caused by the COVID-19 pandemic can apply for a repayable subsidy from the Polish Development Fund (PFR) for up to 324,000 PLN (micro-enterprises) and 3,500,000 PLN (SMEs). The program is a part of the package of laws adopted on April 1st and revised subsequently, commonly called the Anti-Crisis Shield.

Subsidies granted by PFR aim to help ensure the liquidity and financial stability of borrowers. The short-term goal of the PFR Financial Shield is to provide compensation to revenues lost due to the COVID-19 pandemic. The long-term goal, however, is to protect workplaces, since the ability to remit most of the amount of the subsidy depends – to a large extent – on maintaining unchanged employment after 12 months from receiving support.

A detailed list of the allowed purposes to spend the subsidy will be specified in the content of the agreement between the parties. Among the accepted goals are: broadly assumed coverage of running business costs (also the payment of employee’s wages), repayments of other loans, or settlements with related entities (excluding payments to the owner).

The subsidy offer is addressed to micro-enterprises and small/medium-sized enterprises (SMEs).

Micro-enterprises

PFR Financial Shield – requirements

Micro-enterprises must meet all of the following requirements. They can apply for a subsidy if:

• conducted business activities as of December 31st, 2019;
• employ from 1 to 9 employees (excluding the real beneficiary who is a natural person). Note: only the full-time employment (contracts) count – among not included: employees on maternity, paternity, parental, and parental leave, as well as employees signed on the vocational training contract;
• prove the actual impact of the nationwide epidemic state (announced by February 1st, 2020) on sales revenues – a turnover loss of at least 25% in the selected pandemic month, compared to the same month of the previous year, must be presented;
• the annual turnover or balance sheet total of the micro-enterprise may not exceed 2,000,000 EUR;
• the company is not the subject of the following proceedings: restructuring, bankruptcy, liquidation;
• there are no existing arrears with payments of taxes and social security contributions (as of December 31st, 2019);
• the micro-enterprise owner possesses a Tax Residency in the territory of the Republic of Poland and settles taxes within the territory of the RP for the last 2 financial years. Tax Residency means resident status for tax purposes, following the law applicable to at least one European Economic Area country, by having a center of interest, registered office, or effective management within Poland.
• the beneficiary owner (following the Article 2 paragraph 2 point 1 of the AML Act exerting the greatest decisive influence on the activities or activities of the ultimate beneficiary among other beneficiary owners) does not have tax residence in the so-called tax havens (jurisdictions not willing to cooperate for tax purposes within the meaning of the Council Conclusions on Tax Havens).

The value of the PFR subsidies

The value of PFR financial support granted for three years depends on several factors and may vary between 12,000 and 324,000 PLN.

How to calculate the amount of the subsidy?

The base amount is determined by the value of the decrease in revenues of the micro-entrepreneur, therefore, depending on the value of this loss, the basic amount may be:

• 12,000 PLN – if the reported decrease in turnover exceeds 25% but is not greater than 50%;
• 24,000 PLN – if the reported decrease in turnover exceeds 50% but is not greater than 75%;
• 36,000 PLN – if the reported decrease in turnover exceeds 75% but is not greater than 100%.

Afterward, the base amount is multiplied by the number of employees (excluding the owner, who is a beneficiary of the micro-enterprise).

• for the base amount of 12,000 PLN – the maximum amount may be 108,000 PLN.
• for the base amount of 24,000 PLN – the maximum amount may be 216,000 PLN.
• for the base amount of 36,000 PLN – the maximum amount may be 324,000 PLN.

Remission options

A financial subsidy under the PFR is called preferential due to the extended possibility of remission up to 75% of its value. Said remission is possible provided that the following conditions are met:

• if the enterprise continues its business activity after 12 months from the date of subsidy – 25% of the base value can be redeemed;
• if the entrepreneur has kept his employment unchanged 12 months after the loan was granted – then it is possible to remit 50% of the base value. Reduction of employment over the 12 months of the subsidy agreement proportionally reduces the percentage of possible remission.

Small and medium enterprises (MŚP)

The proposal of the PFR Financial Shield for small and medium-sized companies is specified in a similar way to the offer addressed to micro-enterprises. However, extra attention should be paid to the differences resulting from the sizes and amounts that characterize larger forms of doing business.

PFR Financial Shield – requirements

Small and medium-sized business owners must meet all of the following requirements. They can apply for a loan if they:

• conducted business activities as of December 31st, 2019;
• employ from 10 to 249 employees (excluding the beneficiary owner who is a natural person). Note: only the full-time employment (contracts) count – among not included: employees on maternity, paternity, parental, and parental leave, as well as employees signed on the vocational training contract.
• at the same time, they are not the beneficiaries of the PFR Financial Shield program for micro-enterprises;
• prove the actual impact of the nationwide epidemic state (announced by February 1st, 2020) on sales revenues – a turnover loss of at least 25% in the selected pandemic month, compared to the same month of the previous year, must be presented;
• the annual turnover does not exceed 50,000,000 EUR, the balance sheet total does not exceed 43,000,000 EUR;
• the company is not the subject of the following proceedings: restructuring, bankruptcy, liquidation;
• there are no existing arrears with payments of taxes and social security contributions (as of December 31st, 2019);
• the owner possesses a Tax Residency in the territory of the Republic of Poland and settles taxes within the territory of the RP for the last 2 financial years. Tax Residency means resident status for tax purposes, following the law applicable to at least one European Economic Area country, by having a center of interest, registered office, or effective management within Poland.
• the beneficiary owner (following the Article 2 paragraph 2 point 1 of the AML Act exerting the greatest decisive influence on the activities or activities of the ultimate beneficiary among other beneficiary owners) does not have tax residence in the so-called tax havens (jurisdictions not willing to cooperate for tax purposes within the meaning of the Council Conclusions on Tax Havens).

The value of the PFR subsidies

The calculation procedure for the repayable subsidies for small and medium-sized companies is significantly different from the one adopted for the micro-companies. Unlike the other way, the base value of PFR financial support is determined by the percentage of sales revenues for 2019 – adjusted on the matrix to the percentage of proven decrease in sales revenues (turnover) due to the pandemic crisis.

How to calculate the amount of the subsidy?

The base value expressed in percentage points can be:

• 0% – if the reported decrease in turnover is not greater than 25%, it means that the company will not qualify for the PFR Financial Shield program;
• 4% – if the reported decrease in turnover exceeds 25% but is not greater than 50%;
• 6% – if the reported decrease in turnover exceeds 50% but is not greater than 75%.
• 8% – if the reported decrease in turnover exceeds 75% but is not greater than 100%.

Then, the final amount depends on the value behind the indicated percentage of revenues of a given company for 2019. However, the result obtained from the calculation cannot be greater than 3.5 million PLN – due to the maximum final amount allowed by the regulations of the PFR subsidy program, which equals 225 million PLN.

Remission options

A financial subsidy under the PFR is called preferential due to the extended possibility of remission up to 75% of its value. Said remission is possible provided that the following conditions are met:

• if the enterprise continues its business activity after 12 months from the date of granting the loan – 25% of the loan value can be redeemed;
• depending on the loss of sale revenues suffered – it is possible to redeem an additional 25% of the loan value;
• if the entrepreneur has kept his employment unchanged 12 months after the loan was granted – up to 25% of the loan may be redeemed. Reduction of employment over the 12 months of the subsidy agreement proportionally reduces the percentage of possible remission.

The PFR application procedure

The complete process of participation in the PFR Financial Shield program (from application to the final stage of granting the subsidy) is carried out by selected banks, as part of their electronic banking service. The full list of banks accepted by PFR can be found here.

After selecting the bank proper for a given enterprise, the beneficiary owner or person representing the company (duly authorized by the beneficiary owner based on a power of attorney) must ensure that he:

• has access to the beneficiary owner’s electronic banking;
• has the right to make transfers or make declarations of will on behalf of the beneficiary owner;
• has the ability to sign the required statements and the entire application using bank authorization tools.

When examining the application, the bank may not suggest the beneficiary’s creditworthiness – but at the same time, it may obtain information from the Social Insurance Institution (ZUS) or the Minister competent for public finance.

Summary

Applications for subsidies under both programs can be submitted from April 29th, 2020.

The total amount of 25 billion PLN (for micro-enterprises) and 50 billion PLN (for SMEs) were allocated for the PFR Financial Shield programs.