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COVID-19: Brazilian government releases credit line for micro and small companies

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Good news for micro and small business owners in Brazil. The impact of the pandemic that stopped the country and caused many to close their doors and suffer with the uncertainty of the coming days could be minimized with measures recently announced by the government.

Sanctioned on May 19, the National Support Program for Micro and Small Companies (Pronampe) will provide a special credit line amounting to R$ 15.9 billion, which can be used for  the company deems necessary — such as investments and/or isolated and working and associated capital (general expenses such as water, electricity, rent, stock replacement), and even the payment of employee compensation. The program prohibits the use of the loan to distribute profits and dividends among members.

Pronampe is intended for:

  • Micro companies with annual sales of up to R$ 360,000;
  • Small companies with annual sales between R$ 360,000 and R$ 4.8 million;
  • Companies with less than a year of operation.

The credit line should correspond to up to 30% of the company’s annual gross revenue in 2019. Companies with less than one year of operation may have a credit limit corresponding to up to half of their share capital or up to 30% of the average of their monthly billing calculated since the beginning of its activities, as stated in the text published in the Federal Official Gazette.

Loans may be granted by any public or private bank authorized to operate by the Central Bank of Brazil, which includes fintechs, credit unions, among others that may offer these resources with the guarantees provided by the Operations Guarantee Fund (FGO).

The maximum annual interest rate will be equal to the Selic rate — currently at 3% per year — plus 1.25% over the amount granted and has a term of 36 months for payment.

Our partner and accountant Joice Izabel, a specialist in taxes in Brazil, says: “There are more than 13 million small businesses that employ approximately 21.5 million people in Brazil today. The program is important because it facilitates access to credit for small entrepreneurs.”

Pronampe also determines that companies benefiting from credit lines will not be able to fire employees for 60 days after receiving the last installment.

If you still have questions about the program, Drummond Advisors professionals are available to help you.