VALUE ADDED TAX RECEIVABLES LIQUIDITY FACILITY
Application Form - Value Added Tax Receivables Liquidity Facility.pdf
The Central Bank of Barbados commenced the operations of the Value Added Tax Receivables Liquidity Facility (VRLF) for the purpose of guaranteeing timely settlement of refunds owed by the Barbados Revenue Authority to small businesses. Under this facility, eligible financial institutions will factor the
approved refunds due to certified small businesses for a value of $50,000 or less for a period not exceeding 90 days.
The operating terms and conditions of the facility are as follows:
The VRLF is available to small businesses as defined under the Small Business Development Act CAP. 318C, Section 3 (1) or other businesses which satisfy any two of the following criteria:
- Has not more than $1,000,000 as stated or paid up capital
- Has not more than $2,000,000 in annual sales
- Has not more than 25 employees
Confirmation of eligibility as a small business must be provided from the Small Business Development Unit (SBDU).
WHAT CAN BE FINANCED?
Refunds from VAT returns which have been processed and confirmed for payment are eligible for support under this facility.
LIMITS OF GUARANTEE
Guarantees may be provided on credits from three thousand dollars ($3,000) to fifty thousand dollars ($50,000) for any one VAT refund.
EXTENT OF GUARANTEE
Guarantees outstanding shall not exceed one hundred thousand dollars ($100,000) for any one business.
Guarantees may be provided for up to 100% of the credit facilities.
Maturity periods on guarantees for credits shall not exceed ninety (90) days.
Financial intermediaries are responsible for setting the discount rates on receivables which they have factored. However, since the repayment of the amounts factored are fully guaranteed by the Central Bank of Barbados, financial intermediaries are encouraged to use the risk rating of the guarantor as the basis for determining the discount rates.
The following example is provided as a guide in calculating the amounts due to the parties involved:
VAT Refund approved and due: $100
Interest rate charged by finance entity: 5.0%
Credit period: 90 days
A = Interest payable to finance entity | $100 x 0.05 x 90/365 = $1.23
B = Premium payable to Central Bank | $100 x 0.0075 = $0.75
C = Balance payable to small business | VAT REFUND – (A + B) = $98.02
A premium of 0.75% per annum will be charged on facilities guaranteed under the VAT Receivables Liquidity Facility.
ELIGIBLE FINANCIAL INTERMEDIARIES
Guarantee coverage through the Credit Guarantee Scheme for Businesses at the Central Bank of Barbados, will be provided to eligible financial institutions for facilities factored. These institutions are as follows:
- Commercial Banks
- Consolidated Finance Company Limited
- Globe Finance
- Signia Financial Group Inc.
- Caribbean Financial Services Corporation
- Enterprise Growth Fund Limited
- Barbados Agency for Micro-Enterprise Development Ltd. (Fund Access)
- Barbados Workers’ Union Co-operative Credit Union Ltd
- City of Bridgetown Co-operative Credit Union Ltd.