  SMALL ENTERPRISES (LOAN GUARANTEE)  g CAP. 397.  1
CHAPTER 397
SMALL ENTERPRISES (LOAN GUARANTEE) ACT
To encourage the establishment of new small enterprises and the
expansion of existing ones through the provision of loan guarantees by the
Malta Development Corporation.
(1st October, 1997) *
Enacted by ACT XX of 1997.
Short title.
Guarantee) Act.
Interpretation. 
"authorised bank" means a commercial bank authorised by the
Corporation to determine applications for assisted loans considered
to be eligible by the Corporation in terms of this Act;
Cap. 168.
Cap. 386.
"person" means any sole trader or any commercial partnership
constituted under the Commercial Partnerships Ordinance †  or the
Companies Act, or any co-operative society duly registered as such
under the appropriate law for the time being in force in Malta;
Cap. 202.
"Corporation" means the Malta Development Corporation
established under the Malta Development Corporation Act;
"assisted loan" means a loan granted by an authorised bank in
terms of this Act and the repayment of which loan is partially
guaranteed by the Corporation;
"Minister" means the Minister responsible for industry;
"small enterprise" means a person employing between one to ten
persons (including the employer) who owns or operates plant and
machinery or equipment the net value of which does not exceed the
sum of Lm80,000 and whose annual turnover does not exceed the
sum of Lm250,000 or such other number of persons, net value of
plant, machinery or equipment, or any other amount of annual
turnover as the Minister may by notice in the Gazette prescribe:
Provided that groups of companies, partnerships or sole
businesses with the same ownership or control shall be considered
as one enterprise for the purposes of this Act; and
"qualifying activity" means an activity which in the opinion of
the Corporation consists of a trade, craft or business which consists
either in the manufacture, improvement, assembly, processing,
repair, preservation or maintenance of any goods, materials or
commodities including computer software development, agro-
industry and aquaculture, or servicing of equipment, plant or
machinery in relation to the manufacturing industry or any other
service designated as such by the Minister by notice to be published
* See  section 1 of the Act as originally enacted, part of which has been omitted under
the Statute Law Revision Act, 1980, and Legal Notice 143 of 1997.
†Repealed by Act XXV of 1995 (Chapter 386).
  2  CAP. 397. h   SMALL ENTERPRISES (LOAN GUARANTEE) 
in the Gazette.
Qualifying small 
enterprise.
3. (1) A   small enterprise carrying on or carrying out, or
intending to carry on or carry out in Malta a qualifying activity,
which fails to obtain a conventional loan from an authorised bank
for lack of adequate security or business track record, may be
considered by the Corporation to be eligible for an assisted loan in
terms of this Act.
(2) An application for an assisted loan shall only be considered
by the corporation and may only be approved by an authorised bank
if it is intended exclusively for business purposes which shall
include project development, starting up a business, business
expansions and efficiency improvement including research and
development, purchase of stocks and raw material and shall not be
considered or approved if it is intended for the replacement of
existing banking facilities, financing of interest payments, the
acquisition of a company’s shares or the buying out of the members
of a partnership.
(3) The Corporation will not consider an application as eligible
if the loan can be otherwise adequately secured by personal assets
or personal guarantees.
Function of 
authorised banks.
4. (1) An authorised bank may only assess and approve
applications for assisted loans if they have been considered eligible
by the Corporation.
(2) A   small enterprise applying for an assisted loan shall
together with the loan application submit to the Corporation and the
authorised bank a business plan and any financial forecasts that
may be required by the Corporation or the authorised bank in order
to assess the commercial viability of the project and identify the
quantum of the assisted loan.
(3) The authorised bank shall prior to the approval of an
assisted loan under this Act be satisfied that conventional finance
would have otherwise been granted were it not for the lack of
adequate security.
(4) Notwithstanding the provisions of this section a small
enterprise qualifying for an assisted loan may still be required by
the authorised bank to pledge or hypothecate its movable or
immovable property in security of the scheme loan, in which case
such pledge or hypothec shall apply for the whole amount of the
assisted loan and not only for that part of the loan which is not
covered by the Corporation’s guarantee.
The maximum 
limit of assisted 
loans.
5. (1) Assisted loans under this Act may not exceed the
maximum limit of twenty one thousand liri (Lm21,000) or such
other maximum limit which the Minister may by notice in the
Gazette prescribe.
(2) A small enterprise may benefit from several assisted loans
under this Act provided that the total indebtedness under such loan
or other banking facilities shall not exceed the maximum limit of
twenty one thousand liri (Lm21,000) or such other maximum limit
which the Minister may by notice in the Gazette prescribe.
  SMALL ENTERPRISES (LOAN GUARANTEE)  g CAP. 397.  3
Term of the 
guarantee.
6. The term of any assisted loan shall be for a maximum
period of five years from the date of the grant of the respective
loan.
Extent of the 
guarantee.
7. (1) The Corporation’s guarantee exposure regarding an
assisted loan, shall not exceed at any moment in time sixty per
centum of the total outstanding loan balance due to the authorised
bank which shall not exceed the sum of six thousand liri
(Lm6,000):
Provided that in the case of an assisted loan granted to a
small enterprise which has been established for at least three years,
the Corporation’s guarantee exposure may be increased to seventy
per centum of the total outstanding loan balance due at any moment
in time to the authorised bank which shall not exceed the sum of
seven thousand liri (Lm7,000).
(2) The Corporation’s guarantee of the repayment of an
assisted loan shall be subsidiary to the principal liability of the
small enterprise to whom an assisted loan has been granted.
Insolvency of the 
enterprise.
8. In case a small enterprise to whom an assisted loan has
been granted is in a state of insolvency or has been declared
bankrupt and such an enterprise lacks sufficient funds to pay the
total outstanding balance of an assisted loan, any funds available
for the repayment of the assisted loan shall be applied in the same
proportion as the Corporation’s guarantee exposure bears to the
exposure of the authorised bank.
Interest premium.
an authorised bank, shall pay to the Corporation a premium of 0.1%
per annum on that part of the outstanding loan balance guaranteed
by the Corporation:
Provided that notwithstanding the authorised bank’s right
to charge an interest rate below the market rate or to grant a mora-
torium period for the repayment of capital or interest, the payment
of the premium of 0.1% per annum on that part of the outstanding
loan balance guaranteed by the Corporation shall in any case be due
to the Corporation:
Provided further that no moratorium granted by an
authorised bank may increase the terms of the loan beyond a period
of five years.
Monitoring of a 
scheme loan.
10. A small enterprise qualifying for an assisted loan shall - 
( a ) furnish to the Corporation and the authorised bank on
a six monthly basis such information, accounts,
statements and other documents which the Corporation
or the authorised bank may deem to be necessary for
the purpose of this Act;
( b ) provide the Corporation and the authorised bank with
reasonable access to all premises, places, books and
other documents, and allow copies to be made for the
purposes of this Act.
  4  CAP. 397. h   SMALL ENTERPRISES (LOAN GUARANTEE) 
 Right of refusal. 11. (1) Notwithstanding anything contained in the foregoing
provisions of this Act, the Corporation shall have the right to
declare not eligible any application under this Act.
(2) Notwithstanding anything contained in the foregoing
provisions of this Act, authorised banks shall have the right to
refuse any application under this Act even if declared eligible by
the Corporation .
