In connection with the declaration of a state of emergency, many companies and entrepreneurs are faced with limited or completely halted operations. As a result, they do not have the expected income to properly repay their liabilities and loans. In this case, after negotiations with the CNB and the Czech Banking Association, banks allow not only ordinary consumers but also small and medium-sized enterprises [1] to defer the repayment of their loans. Although this is merely a recommendation on how to proceed, the solution to the situation through possible deferral of repayments has received the support of most banks.

The deferral can be for 3-5 months, depending on your bank. You can apply for deferral electronically via forms on your bank’s website to eliminate personal contact. As part of the deferral application, you must provide, or be prepared to provide, the bank with the necessary documents showing clear information that your business has been affected by measures related to the spread of COVID-19. There is no automatic entitlement to deferral, and the possibility of deferral is itself a rather accommodating step on the part of the banks, so each application should be subject to an individual assessment. However, we can assume that if you have a good payment history with the bank, the chances of getting the deferral approved will certainly be higher. The deferral is not an ordinary deferral, but rather an extraordinary deferral, and it is not subject to a fee. You do not have to worry about the bank asking you for all your deferred repayments at once after the grace period. The standard procedure is that the maturity of the loan is extended by the number of months of grace, so you will continue to make repayments after the grace period as before. On the issue of interest, according to the information currently available from the banks, no relief can be assumed. Interest is therefore not subject to the deferral and accrues in the standard way during the grace period as well.

In any case, it is best to discuss the specific course of action or the next steps with your banker. In a situation where you do not have a loan but the current situation has also affected you considerably, we recommend contacting Českomoravská záruční a rozvojová banka, a.s. ( ČMZRB has launched its “COVID Loan” Programme and COVID II Programme, under which it seeks to assist small and medium-sized entrepreneurs with an interest-free loan to further their operations.

[1] CBA press release of 17 March 2020

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