The European Commission ruled that 83 percent of the $400 million ($600 million) loan was in line with temporary EU rules on state aid measures, drawn up to help companies through the economic and financial crisis.
The remaining 17 percent will be provided on market conditions and therefore does not constitute state aid, the commission stated.
“The state guarantee will contribute to the implementation of Saab’s business plan without giving rise to any undue distortions of competition,” said EU Competition Commissioner Neelie Kroes.
In particular, Saab will pay “an adequate remuneration” for the guarantee and provide sufficient securities in case the guarantee would be drawn.
Sweden announced last month that it will guarantee the loan following a decision by US automaker General Motors to sell Saab to Dutch luxury sports car maker Spyker.
As part of the agreement, Spyker will form a new company, Saab Spyker Automobiles, that will carry the Saab nameplate forward.
GM officials said the deal called for Spyker to pay $74 million in cash and allow GM to retain redeemable preferred shares worth an estimated $326 million.
The Swedish loan is to help Saab produce less polluting and more eco-friendly cars.