Government measures in key jurisdictions 5th edition - Flipbook - Page 70
Israel
Simon Jaffa | sjaffa@barlaw.co.il | +3 640 0600
Contributor: Barnea
Loans and
financial
support
Following the initial outbreak of the pandemic, the Israeli government has declared several
support initiatives in an aggregate amount exceeding NIS 100 billion. These support initiatives
included government-backed loans, governmental grants to businesses implementing social
distancing and innovative communication technologies, deferral of tax payments, and
cancellation of municipal and other taxes.
Has the
government put
in place any new
bank funding
schemes?
Specifically, the government had initially allocated up to NIS 22 billion, which later increased to
NIS 40.3 billion, to support loans for businesses by providing funding entities with a guarantee
for 95% of any loan amount provided. These monies were and continue to be provided through
the government’s already existing fund for supporting small-medium businesses, operated by
the Ministry of Finance, and are not time-limited.
The funding scheme is divided into two main routes (with a slight overlap between the two).
The first route is designated for small-medium entities (SMEs) whose turnover did not exceed
NIS 400 million in the previous year. The second route is designated for large entities (LEs)
whose turnover exceeded NIS 200 million in the previous year. By December 2020, of the NIS
40.3 billion more than NIS 23 billion had already been approved for more than 57 thousand loan
applications.
Under the SME route, each SME may request a loan of up to 40% of its previous year’s turnover,
limited to up to NIS 20 million. Under the LE route, each LE may request a loan of up to 8% of its
previous year’s turnover, limited to up to NIS 100 million (while for hi-tech companies the 8%
may be based on the company’s costs, other than financing costs). The loans for SME’s are
provided with attractive interest for a period of 10 years, while the loans for LE’s are provided
with attractive interest for a period of up to five years, with each entity also allowed a 12-month
grace period on loan repayment. The government further undertook to finance for SMEs any
interest due on the loan during the first 12 months. The loans are also made available to new
businesses, who can receive up to the lower of NIS 500 thousand or 16% of their costs.
As a precondition to receipt of the loans, all borrowing entities are required to demonstrate that
they experienced cash-flow difficulties due to the Covid-19 pandemic, as well as to provide the
financing entities with a deposit equal to 5% of the loan.
The government has also increased the funding of several government aided programs and
agencies, such as the Israeli Innovation Authority, aimed at the advancement of advanced
technologies to help stimulate the hi-tech industry, and to address the shortage of skilled
manpower therein.
Another manner in which the government has provided financial support was through easing of
regulations on the banks as well as grant of loans at low interest rates by the Bank of Israel to
the banks. One such change in regulation included allowing the banks to reduce their leverage
ratio by 0.5%, thereby allowing the banks more freedom in granting loans.
Employment
What
financial support
is the
government
providing to
businesses and
to individuals on
employment
issues?
70
Encouragement Grant Law, 2020 was passed, enabling employers who recruited or returned
to work a "qualifying employee" to be eligible for a grant. A grant of NIS 3,500 will be paid (in
monthly installments of NIS 875) if the "qualifying employee" returned to work or was recruited
before June 1, 2020. A grant of NIS 7,500 will be paid (in monthly installments of NIS 1,875) if
the "qualifying employee" returned to work or was recruited after June 1, 2020.
A "qualifying employee" is an Israeli resident whose monthly salary is at least NIS 3,300 and to
whom one of the following applies:
•
•
he/she is between 18 years old and 67 years old,
one of the following applies:
- he/she was discharged to unpaid leave between March 1, 2020, and April 30, 2020, or
was on parental leave during the aforementioned period, or
- he/she was eligible for an adjustment grant or income security benefit or
unemployment benefit for May 2020.
Government measures in key jurisdictions
