The measures aimed at combatting the COVID-19 epidemic caused by the coronavirus are having a substantial impact on the economy, both globally and in Croatia. Direct consequences of social distancing, isolation and quarantine measures are impacting a large number of business subjects, which are experiencing or potentially facing liquidity risk as a result. With the aim of protecting jobs and maintaining at least a minimum business activity of companies, the Croatian Government is introducing support measures for businesses and income-generating professions directly or indirectly threatened by the consequences of measures aimed at combatting the epidemic, while credit institutions are introducing new products for financing liquidity for companies and free professions.

In order to maintain liquidity of companies, in cooperation with the Croatian National Bank, Croatian Bank for Reconstruction and Development (HBOR), Croatian Agency for SMEs and business banks, the Croatian Government is introducing measures which include moratorium on clients' credit obligations for existing loans, reprogramming of existing loans, and new loans for liquidity and working capital which are approved in cooperation with business banks.

Starting 31 March 2020 all economic subjects in the Republic of Croatia, whose business operations are threatened as a result of the COVID-19 epidemic, can initially apply for Croatian Government's measures aimed at upholding the level of economic activity and liquidity via the unique online web portal that was established by FINA for that purpose (e-Relief Application Point).

Goverment measures

Who can apply?

All economic subjects in Croatia whose business operations are threatened as a result of Covid-19:
-    companies 
-    trades, free professions
-    family agricultural businesses 

Measures available to applicants applying via the web portal:
•    loans for liquidity,
•    deferral of loan repayment,
•    loan reprogramming, 
•    loans for businesses operating in the culture and creative industries 

The institutions, to which the initial applications submitted via the e-Relief Application Point web portal will be forwarded, are all banks that have the licence to operate in Croatia.

According to a decision made by the Croatian Government on 2 April 2020, in order to implement economic support measures in response to the epidemic, Fina is in charge of developing and managing a digital platform which will allow:
-    applying for appropriate support measures online,
-    collecting information necessary for approving applications, for determining the unique score of adjustment to the circumstances (COVID Score) and
-    establishing a reporting system for monitoring the implementation of support measures (e-Relief Application Point web portal).

Fina is traditionally a leader in digitalisation (digital certificates – first certified issuer, START – digital launching of a business, infoBiz – the most advanced business information service, instant payments – innovation in the payment system) thus said product is a natural development of its digital orientation.

The system collects applications in a centralised manner and, after verifying submitted information, sends application data to banks. Upon receiving and processing application data, each bank contacts the applicant and takes over the process of approving a loan in line with its own criteria.

Applicants can submit their initial applications via the e-Relief Application Point web portal by vising

Applicants log in via the National Identification and Authentication System (NIAS). NIAS was established and is managed by Fina. The system is connected to all official state registries and databases, as a result of which certain information can be verified (Personal Identification Number system, Ministry of Interior database, Trades Registry, Croatian National Bank). To log in, the user selects a credential they own from the List of Accepted Credentials, and the system then guides them to input the credential, which must be at least level 2. 

To process the applications for Government's support and liquidity loans Fina has developed the COVID Score, a scoring system used to evaluate how impacted businesses are by the coronavirus epidemic as well as to ensure transparency and monitor the results of the Government's measures, so that it could be assessed whether additional financing is needed.

COVID Score is calculated for every application based on available information, for the purpose of implementing economic recovery measures and for support which is allocated via the Tax Authority, Croatian Employment Service, for the purpose of reporting to the Croatian Government about the justification of allocated support.  

Methodology for calculating the COVID score (CS)

In order to make it simpler for businesses to prove they have been impacted by the epidemic, as well as to save money and time, business subjects that apply for Croatian Government's support do not need to submit additional documentation – instead, data will be collected from verified official databases/sources based on information that businesses have already submitted through usual processes to state institutions like the Tax Authority, Croatian Health Insurance Institute or the Croatian Employment Service. 

Which information is used to calculate the COVID Score?

Information from available sources is used to calculate CS, specifically: 

a) Information from the application - information from the Statement on the estimated reduction of the amount and percentage of revenues in 2020 compared to 2019 and from the Statement on the decline of the amount and percentage of revenues in the first quarter of 2020 compared to the same period in 2019, as well as information from the Statement on the required loan amount; 

b) Data from Fina's information system – information on the identification of the business subject, information about the size and type business activity, information from annual financial reports, information about account freezes and information about the credit rating; 

c) Information from the Tax Authority – information about due but unpaid tax obligations (the date when the applicant was added to the list of tax debtors (31 October 2019) regardless of subsequent tax payments, information about VAT charged (VAT charged in transactions for goods and services – total, tax prepayment – total, VAT yet to be paid or refunded), information whether the applicant has failed to pay employees' salaries (date when the applicant was added to the list of businesses which failed to pay employees' salaries), and information from JOPPD forms that the applicant has submitted (gross and net salaries and number of employees), and information on cumulative account transactions and account balance which is submitted by credit institutions to the Tax Authority as required by tax regulations.

d) Information from the Croatian Pension Insurance Institute – information about the number of employees as of a certain date, and the number of expired fixed-term employment contracts, retirements and terminations resulting from employee behaviour. 

e) Information from the Croatian Employment Service – information about the applicant's history of hiring and letting go of employees and about using employment support measures.

What are the elements of risk that are included in the COVID Score?

The scoring system assesses nine elements of risk that may impact the liquidity of a business, some of which may be an eliminating factor (if the score is equal to -100), specifically:  

1.  Business type score – the score is awarded based on the type of business subjekt.

2. Dominant activity score – the score is awarded based on the assessment of how impacted individual NKD activities are based (NKD - National Classification of Activities). An assessment of impact was developed for every business activity based on the NKD activity grade. The highest grade (4) has been awarded to business activities that are most impacted by COVID; activities on which the impact of COVID is negligible (0) do not receive a score based on business activity; while certain business activities might also be earning additional revenues as a result of COVID, and are thus awarded a negative score (ranging from -1 to -4, range of additional revenue from +5% - 25%), for example delivery services and online stores. The grades were expertly determined and are subject to change over time, in order to match actual effects in certain business activities.

3. Fina rating – priority is given to businesses with lower credit risk, based on the Fina credit rating assessment. 

4. Business subjects with frozen accounts –subjects whose accounts were frozen for longer than 15 days during 2019 have lower priority compared to subjects whose accounts were not frozen; subjects whose accounts were frozen for longer than 15 days in the period from the beginning of 2020 until the beginning of the implementation of measures have lower priority; and subjects whose accounts were frozen after the beginning of the implementation of epidemic combatting measures have priority. The date when the freeze began is considered to be the date of the 16th day of the freeze. 

5. Reduction of the number of employees – according to proposed measures for protecting jobs, subjects that laid off employees, with the exception of when that happens due to the expiration of the fixed-term employment contract, retirement or termination caused by employee behaviour, earn fewer points if the reduction of employees exceeds the criteria defined by the support measure. 

6. Expected decline of business revenues compared to the same period in 2019. – subjects that expect a greater decline of business revenues receive higher priority, and subjects that do not experience a decline of business revenues receive lower priority and this element of the overall COVID Score is scored negatively. 

7. Projected liquidity (with expected reductions caused by COVID) – subjects whose projected liquidity is negative earn the right to additional financing, while subjects which are not experiencing liquidity problems do not earn the right to additional financing (at favourable terms). Liquidity is assessed based on the biggest decline of business revenues compared to the appropriate period in 2019 (annual or quarterly). 

8. The business is on the list of subjects that failed to pay employees' salaries based on latest available data – eliminating criteria 

9. The business is on the list of tax debtors based on latest available data – eliminating criteria

Maximum total score is 700 points and the minimum is -100, whereby a score of -100 is the eliminating criteria.

COVID Score is calculated in two ways: by including negative information (items 8. and 9. – eliminating criteria) and by not including them. 

What does COVID Score look like? What are the possible scores?