The Legal Impacts of COVID-19 in the Travel, Tourism and Hospitality Industry

27 6.1.2. Aid in the form of guarantees on loans Aid under Section 3.2 of the Temporary Framework (3.2 TF aid, “Aid in the form of guarantees on loans”) is a liquidity tool. 94 Under this aid category, Member States are allowed to grant guarantees for loans subject to favourable but gradually increasing premiums. 95 The guarantees can be granted for six years maximum. 96 However, Member States can “modulate” the guarantee terms in their schemes to a certain extent by offering e.g. longer (but maximum 8-year) duration at higher premiums or flat-rate premiums. 97 The total amount of loans that can be backed by 3.2 TF guarantees is linked to the liquidity needs of the undertaking: it is the higher of double the 2019 wage bill of the undertaking or 25% of its 2019 turnover. 98 Exceptionally, the total amount of the guaranteed loan can be established on the basis of a liquidity plan presented by the beneficiary. 99 The guarantee is maximum 90% of the loan principal if the losses are sustained proportionally by the state (the guarantor) and the credit institution and is capped at 35% if it is a first- loss guarantee borne by the state as the guarantor. 100 Although technically a liquidity tool, the guarantees can also used as collateral for investment loans. 101 The exclusion of undertakings in difficulty is the same as in the case of 3.1 TF aid. 102 In conclusion, while guarantees are possible as 3.1 TF aid on more flexible terms, 3.2 TF guarantees do not occupy space under 3.1 TF aid ceilings, can exceed them in value depending on the liquidity needs of the beneficiary, and are available as a parallel tool for Member States. related sectors) or C(2020) 4835 final of 9 July 2020 (SA.57797 (2020/N) – Belgium Support for the social tourism sector). 94 Point 24 of the Temporary Framework. 95 Point 25(a) of the Temporary Framework. 96 Point 25(f) of the Temporary Framework. 97 Point 25(b) of the Temporary Framework. The Commission published a document summarising its case practice on modulation options, available in https://ec.europa.eu/competition/state_aid/what_is_new/summary_of_case_practice_on_modulation_u nder_point_25(b)_of_TF.pdf ( accessed on 1 March 2021). 98 Point 25(d)(i) and (ii) of the Temporary Framework. 99 Point 25(d)(iii) and point 25(e) of the Temporary Framework. 100 Point 25(f) of the Temporary Framework. 101 Point 25(g) of the Temporary Framework. 102 Point 25(h) and (h- bis ) of the Temporary Framework.