Credit guarantees for those of you who are lenders

A lender may apply for a credit guarantee for a project's building credit and/or final financing. An essential part of Boverket's examination of the application is to assess the long-term sustainable market value of the completed property, and that the borrower has sufficient capacity to pay.

When can the guarantee be issued?

The guarantee may be issued for the project's building credit when construction starts or during the construction project period, and/or for the project's final financing.

Conditions for the guarantee

For a credit guarantee to be issued, the lender must consider that the borrower has the capacity to fulfil the loan undertaken. An essential part of Boverket's examination of the application is to assess the long-term sustainable market value of the completed property, and that the borrower has sufficient capacity to pay. This means that cash flow for the project must withstand normal operating and maintenance costs, as well as a margin for higher interest rates and possible vacancies. As a general rule, there must be a mortgage deed as security for the guarantee loan, but other forms of securities may also be approved.

When Boverket and the lender come to an agreement on the conditions, a guarantee agreement is signed in which the conditions and fee for the guarantee are established. The guarantee can be arranged for any amount within the given limits. The credit guarantee may cover a maximum of 90% of the established market value of the property, assessed without regard to speculative and temporary conditions. In regions with low market values, the amount of a credit guarantee may correspond to a standard amount.

Application

In order to make a preliminary assessment or sign a contract for a credit guarantee, Boverket needs:

• project description
• market valuation of the property
• credit transfer plan if the guarantee is valid during the construction period
• basis for the assessment of the borrower's paying capacity in the form of a cash flow calculation for the property, credit rating, current annual report or similar
• credit memos where appropriate.

If the application concerns a guarantee for an owner-occupied house, a market valuation of the property is required as well as a credit transfer plan if the guarantee is for the construction period.

Fee

Boverket will charge a guarantee fee that corresponds to the expected loss and other costs that the guarantee incurs for the state. The fee depends on the risks inherent in the specific project and is only charged after Boverket and the borrower have signed an agreement on the guarantee.

Factors that affect the fee:

• The guarantee's proportion of the value
• Type of municipality the property is located in
• Mortgage deed
• Guarantee period/credit transfer plan
• Size of company, is assessed based on the EU Commission's definition

The fee shall be paid as an up-front fee for guarantees during the construction period. The exact sum in SEK depends on the length of the construction period and how the credit transfer plan is distributed. The fee cannot be refunded even if the guarantee is terminated prematurely.

For guarantees after completion, the fee is paid as a per cent of the guaranteed amount in advance one year at a time. If the guarantee is terminated prematurely, the fee is repaid for the remaining part of the year.

Framework agreement

In order to sign a credit guarantee, the lender must have a framework agreement with Boverket. According to the framework agreement, before an individual guarantee agreement is signed the lender must make an independent assessment of the borrower's ability to pay and the value of the property, among other things.

Processing time

Applications for credit guarantees are submitted by lenders. Boverket can give a decision on whether the credit guarantee will be granted or not within approximately 1-3 weeks of receipt of the application. There are often discussions with the lender regarding the structure and possible additions during this processing time.