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General Lending program
General Information
The General Lending Program covers commercial credit and trade facilities of an amount above AMD 60 mln and up to the single borrower limit as defined by the local legislation. General Lending program offers full range of credit products and services conditional on a complete financial and operational risk analysis of applicant companies. The facilities are provided in Armenian Drams, United States Dollars and Euros. The loan drawdown will be made through crediting the respective current account or, in case of overdraft facilities, by allowing for a negative balance on the current account of the borrower.
Companies and sole proprietors (individual entrepreneurs) registered in the Republic of Armenia are eligible to apply for a facility under the General Lending Program. In limited cases, the Bank may provide commercial banking products and services to non-resident companies, as well as legal entities with state ownership. It is preferable that the entity applying for the facility has at least 1 year uninterrupted business activity. The current lending guidelines of our Bank encourage lending to entities, whose principal activities are related to international trade (export/import relationship), production/manufacturing/services, distribution, as well as wholesale and retail trade of goods.
The bank makes the decision on extending General Lending facilities at its discretion taking into consideration a variety of factors including the customer’s account conduct with HSBC Bank Armenia and/or other financial institution(s), the financial and operating standing of the potential borrower, the business projections, the credit history of the borrower, the quality of the collateral, etc.
The maximum period for making decision on loan application is 15 working days after the bank has received all the necessary documents and information related to the application.
However, in some cases the mentioned period may take longer due specifics of the deal.
The maximum period for informing the applicant about the decision is 3 working days after making the respective decision.
The loan amount is provided on the next working day after receiving the written request of the customer, provided that all the loan documentation has been completed and the security has been completed in due manner, with respective notarizations and registrations in state authorities in place, where applicable.
The range of interest rates applied on the facilities under the General Lending Program is HSBC Bank Armenia CJSC base rate plus a fixed interest margin, so that the resulting interest rate is initially in the range of 12%-18% per annum. It should be noted that in case of facilities secured by cash or first class bank guarantees the effective interest rate can be lower.
In case of commercial banking facilities provided in foreign currency the amount of repayments can be affected by the fluctuations of FX rates.
Calculation and payment of interest
The interest is accrued on a daily basis on the outstanding balance of the principal amount of the facility in the currency of the loan. The calculation of interest is based on a 360-days year. The interest accrued during n days is calculated using the following formula:
where:
I = interest accrued
n = the number of days in the period
r = annual stated interest rate
Oi = outstanding balance of the facility at the end of the i-th day
The interest is payable on a monthly basis.
The loan principal amount is generally repaid in equal monthly monthly installments. However, more flexible repayment schedule and/or different frequency of installments can be determined based on the specifics of each business and seasonal character of the borrower’s cash flows.
Fees and Charges
While granting commercial banking services, the Bank may charge the following non-interest fees:
Accounts servicing one-off fee – 0.5% of any proposed new amount
Accounts servicing annual fee – AMD 370,000
Non-utilization fee – if the facility utilization is below the minimum required level stated in facility agreement (usually 80% of the total limit), a non-utilization fee is charged on the non-utilized part below the minimum required level, applying the facility interest rate. Alternatively, a non-utilization fee (normally, 2% per annum) is applied on the total unutilized portion of the facility
Prepayment fee – 50% of unearned interest amount is charged in case of early repayment of the full amount of the loan during a period defined in the loan agreement (usually 6 months)
Default Charge - if the loan installment or interest is overdue for more than 5 banking days, a fee is charged for each case equal to AMD 250,000.
Default Interest Rate – HSBC Bank Base Rate + 25% per annum.
Covenant Breach Fee – Covenant Breach fee may be applied as specified in the facility agreement.
Attention: In case of failing to timely meet the obligations related to interest and principal repayments, respective information will be recorded in Loan Register.
Security
The commercial credit and trade facilities provided by our bank generally require adequate security cover to be provided by the customer. Security is not the primary factor for the assessment of a proposal; however the availability of adequate collateral securing the requested commercial credit and trade facilities is necessary. We accept the following types of securities as primary security:
- Marginal Deposit/ Time Deposit or
- First class Bank Guarantee
- Residential or commercial property (located in RoA).
In addition to primary security, the Bank may also accept additional security in form of vehicles, machinery, as well as floating charge over stock of goods. The commercial and trade facilities are also typically secured by personal guarantees of the company’s owners.
The acceptable level of the security/facility ratio is determined taking into consideration the customer’s credit history, facility amount, security type, availability of audited financial accounts, risk and return considerations, and degree of liquidity of their security. Generally, the security/facility ratio determined as the ratio between the appraised value of tangible security and the overall limit of the extended facilities, normally should not be less than 1.5, but may be higher at the discretion of the Bank.
Property pledged to the Bank should be valued by either of independent valuators cooperating with the Bank. The valuation cost may vary from AMD 10,000 to AMD 300,000. In certain cases the cost of the valuation may be higher than the indicated range, depending on the type of the property valued.
The properties/vehicles/machinery/stock of goods pledged to the Bank should be insured at the Bank’s request by either of the Insurance companies cooperating with the Bank. Insurance premium may vary from 0.1% to 3% depending on the type of security. The insurance tariffs offered by the insurance companies may be different from the presented range, depending on the specifics of the insured vehicle, the insurance coverage required, as well as in line with overall market development.
The Bank has to indemnify itself at the expense of the security provided in case of breach by the customer of the obligations under the respective agreement.
In case the securities pledged to the Bank are not sufficient for repaying the outstanding loan amounts of the customer, the Bank reserves the right to indemnify itself through repossession of other properties of the borrower in accordance with RA legislation.
