First section of 20,000 million euros of the ICO’s line of guarantees for companies and the self-employed to mitigate the effects of COVID-19
Royal Decree-Law 8/2020 of 17 March on urgent extraordinary measures to deal with the economic and social impact of COVID-19 establishes a series of measures to preserve normal financing flows and levels of working capital and liquidity, in order to enable companies and the self-employed to continue paying employee salaries and supplier invoices while maintaining economic activity.
Among these measures, Article 29 of this regulation provides a line of guarantees for a maximum amount of 100,000 million euros to be provided by the Ministry of Economic Affairs and Digital Transformation to cover financing granted by financial institutions to companies and the self-employed.
The Council of Ministers, by means of the Resolution of 25 March 2020, of the State Secretariat for the Economy and Business Support, approved the characteristics of the first section of the ICO guarantee line for companies and self-employed workers, to alleviate the economic effects of the COVID-19, without requiring subsequent regulatory development for its application. The specific conditions for the release of the first section of the line of guarantees, for a maximum amount of 20,000 million euros, are detailed below.
The applicable conditions and requirements to be met for the first tranche of the guarantee line, which will amount to 20 billion euros, will guarantee financing granted by credit institutions, financial credit establishments, electronic money institutions and payment institutions to companies and the self-employed to mitigate the effects on their activity as a result of the COVID-19. The guarantees will be managed through the Instituto de Crédito Oficial.
It has been empowered to make the necessary arrangements for the effective implementation of this line of guarantees within 10 days of the adoption of that Council of Ministers Agreement.
If it is in your interest to access this financing, we recommend that you contact your financial institutions as soon as possible so that you can position yourself as a priority within the selection process. Some of the entities are already parameterizing their risk model to make the granting process more efficient, establishing a system of pre-granted loans based on risk analysis and selection, so that the management and granting of the loans can be expedited.
Remember that you can contact Audiaxis, where its professionals are at your disposal to help you in all matters relating to risk analysis, cash flow control, preparation of files to be submitted to financial institutions and other matters relating to economic and financial aspects arising from this extraordinary situation.
The applicable conditions and requirements for access to these guarantees are detailed below:
Definitions and purpose
Definition of SMEs
The category of micro, small and medium-sized enterprises (SMEs) is made up of companies with fewer than 250 employees and an annual turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million.
2. In the SME category, a small enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million.
3. Within the SME category, a micro-enterprise is defined as an enterprise which employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million
Definition of financial entity
For the purposes of this Agreement, financial institutions shall mean credit institutions, financial credit establishments, electronic money institutions and payment institutions.
To facilitate the maintenance of employment and alleviate the economic effects of COVID-19, the line of guarantees is intended to cover new loans and other forms of financing and renewals granted by financial institutions to companies and the self-employed to meet financing needs arising, inter alia, from the payment of salaries, invoices, working capital requirements or other liquidity needs, including those arising from the maturity of financial or tax obligations.
Amounts of the first tranche and sub-tranches
Total amount of the first section of the guarantee line
Up to 20,000 million euros, provided by the Ministry of Economic Affairs and Digital Transformation
Amounts per sub-tranche of the guarantee line
Two sub-tranches are created, with the following amounts and categories
:Up to 10 billion euros for renewals and new loans granted to the self-employed and SMEs.
Up to 10 billion euros for renewals and new loans granted to companies that do not qualify as SMEs.
Eligible loans and risk analysis
Characteristics of eligible loans
Loans and other operations granted to companies and self-employed individuals with registered offices in Spain that have been affected by the economic effects of COVID-19, provided that
: The loans and operations have been formalised or renewed after 17 March 2020
The borrowers are not in a situation of default when consulting the files of the Bank of Spain’s Central Risk Information Service (CIRBE) at 31 December 2019
The borrowers are not subject to a bankruptcy proceeding on 17 March 2020, either because they have filed for bankruptcy or because the circumstances referred to in Article 2.4 of Law 22/2003 of 9 July on Bankruptcy have arisen for the bankruptcy to be requested by their creditors.
Maximum loan amount per customer
Up to a maximum of 1.5 million euros in one or several loan operations to self-employed persons and companies, the specific provisions of Commission Regulation (EU) No. 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid will apply.
For loans above 1.5 million euros, up to the maximum established in the European Commission’s Temporary Framework for State Aid for both self-employed persons and companies that meet the condition of SMEs and for companies that do not meet the condition of SMEs.
Analysis of the risk profile and eligibility conditions of the operation
Operations of up to EUR 50 million that have been approved by the institution in accordance with its risk policies shall be guaranteed, subject to subsequent checks on their eligibility conditions.
Operations above EUR 50 million will be guaranteed once ICO has analysed compliance with the eligibility conditions in a manner complementary to the financial institution’s analysis.
Sources of funding for operations
This guarantee scheme will be granted to loans and other forms of financing to companies and self-employed persons granted by financial institutions regardless of their source of financing. However, if the loan operation is financed by ICO, the scheme provided for in this Agreement will apply to ICO’s participation on the same terms.
Maximum rates, remuneration, terms of formalisation and maximum maturity of the guarantee
Maximum guarantee percentages
In the case of SMEs and the self-employed, the guarantee will amount to a maximum of 80% of the operation.
In the case of companies that do not qualify as SMEs, the guarantee will cover a maximum of 70% of new operations and 60% of renewal operations.
The remuneration for guarantees granted on loans up to EUR 1.5 million shall be 20 basis points on the balance of the total amount guaranteed.
The remuneration of the guarantees granted to self-employed persons or companies that are considered SMEs for operations with a nominal amount of more than 1.5 million euros will be
- 20 basis points per year for guarantees with a maturity of up to 1 year.
- 30 basis points per year for guarantees with a maturity of more than 1 year and up to 3 years.
- 80 basis points per annum for guarantees with a maturity of more than 3 years and up to 5 years
The remuneration for guarantees granted to companies that are not considered SMEs for new operations with a nominal amount of more than
- 30 basis points per year for guarantees with a maturity of up to 1 year.
- 60 basis points per annum for guarantees with a maturity of more than 1 year and up to 3 years
- 120 basis points per annum for guarantees with a maturity of more than 3 years and up to 5 years
The remuneration of the guarantees granted to companies that are not considered SMEs for renewal operations with a nominal amount of more than
- 25 basis points per year for guarantees with a maturity of up to 1 year.
- 50 basis points per year for guarantees with a maturity of more than 1 year and up to 3 years.
- 100 basis points per year for guarantees with a maturity of more than 3 years and up to 5 years.
Deadline for application for guarantees
Guarantees may be requested until 30 September 2020. The deadline may be extended, in line with EU State Aid rules, by agreement of the Council of Ministers.
Maximum maturity of the guarantee
The term of the guarantee issued will coincide with the term of the operation up to a maximum of 5 years.
Rights and obligations of financial institutions
The financial institution will decide on the granting of the corresponding financing to the customer in accordance with its internal procedures and policies for granting and risks.
The costs of new loans and renewals benefiting from these guarantees will remain in line with the costs charged before the start of the COVID-19 crisis, taking into account the public guarantee of the guarantee and its cost of coverage.
Financial institutions undertake to maintain the limits of the working capital lines granted to all customers, and in particular those customers whose loans are guaranteed, at least until 30 September 2020.
Financial institutions will indicate these operations in their accounting and risk management systems, in order to facilitate their traceability. Subsequently, they shall incorporate this signage in their declaration to the Central Risk Information Office, following the instructions of the Bank of Spain to this effect.
The line is subject to the European Union’s state aid rules.