Fund for Local Authorities and Governments in Bulgaria – FLAG JSC was established in March 2007 by the Council of Ministers with funding provided through the Bulgarian National Budget as an instrument of the central government policy for regional development.
The mission of the Fund is to provide financial assistance to municipalities and municipal companies in the process of the preparation and the successful implementation of projects under the Operational programmes (OP)/Rural development programme (RDP), which aim towards the modernization and extension of the municipal infrastructure and the creation of sustainable and modern local communities.
FLAG provides financing to beneficiaries and/or their associated partners, who prepare or implement projects under the Operational programmes, the Rural development programme, the Cross-border cooperation programmes and other programmes and financial mechanisms, financed by the EU, or under other international programmes, but only after the explicit decision of the Board of Directors of the Fund (as of this moment, these programmes are the following: Financial mechanism of the European economic area 2009-2014, the Norwegian financial mechanism 2009-2014, the Bulgarian-Swiss cooperation programme for reduction of the economic and social inequalities in the European Union 2009-2019).
FLAG determines the price of each loan depending on the specific loan application. The price of each loan is the sum of the following elements:
- 6-month EURIBOR;
- FLAG Margin – includes margin of the equity and borrowed capital, as well as administrative costs. The current FLAG Margin is 1.78%;
- Risk Margin – the maximum value of the risk margin is 3 %.
The municipality/municipal company utilizes the approved loan through one or more tranches, depending on what has been negotiated in the Loan agreement. The utilization schedule of the funds under the loans for implementation of projects will comply with the payment requests to the Managing Authorities of OP/RDP.
The repayment schedule of each Loan agreement is negotiated depending on the specific application, the capabilities of the municipality/municipal company and the sources for repayment of the loan. The negotiated interests on the loans are accrued and are due monthly, unless a different schedule is negotiated in the Loan agreement. The source for repayment (regarding loans for implementation of projects) of the eligible costs of the principal are the project payments by the MA, and the source for repayment of the ineligible costs – the own revenues of the municipality/municipal company.
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