A bank guarantee is an instrument in which a public institution or a development bank takes on part of the risk of loan default, thereby enabling financing for a company that would otherwise not have sufficient collateral. A preferential loan goes a step further and offers a lower interest rate, a longer repayment period or a deferral of instalments compared with market conditions. Both instruments belong to the so-called financial instruments, which differ from grants in that the funds are repaid and can be used again. For small and medium-sized enterprises they are often more accessible than a standard call, because there is no competition for a limited allocation but rather an assessment of creditworthiness and intent. Here too, the advantage relative to the market counts towards the state aid limits and must be recorded.
See also: Financial instruments, De minimis aid scheme, Combination of a grant and a loan.
