Conditions of ICO Guarantees for CoVid19

Conditions of ICO Guarantees for CoVid19

In the BOE of March 26, 2020, is published the Resolution on the first tranche of ICO Guarantees COVID 19. (“ICO” is the Spanish acronym for “Insituto de Crédito Oficial”, in English “Official Credit Insitute”) Whose concession was included in the RD 8/20 of March 20 and which we discussed in our article on force majeure.

In addition, in a recent collaboration, we analyzed the financing strategies in times of CoVid19.

The total maximum amount is 100 billion Euros to be provided by the Ministry of Economic Affairs and Digital Transformation. Although in this first installment, the maximum amount is 20 billion Euros for loans formalized or renewed after March 17, 2020.

Loans up to 50 million will be guaranteed when they have been approved by the financial institution according to its risk policies. Loans over 50 million require ICO’s complementary analysis on eligibility and compliance with requirements.

Their objective is to provide financing and liquidity to the market, in order to maintain economic activity. And they have the characteristic that lender and guarantor have “pari passu” status. In other words, the issuing entity and the State, through the ICO, are on an equal footing.

The requirements for obtaining ICO Guarantees, and their conditions, are described below.

Conditions of the applicant (Self-employed or Company)

• Registered office in Spain
• Having had their activity affected by COVID 19
• Not to be in a situation of default in the files of the Bank of Spain’s Central Credit Register (CIRBE) on 31/12/19.
• Not to be subject to insolvency proceedings as of 17/3/20, for having requested a declaration of insolvency.
• That the circumstances of article 2.4. of the LC (Insolvency Law) for the necessary insolvency proceedings do not exist, that is to say;

1. That they are not in general dismissal in the current payment of their obligations.

2. That they do not have embargoes for pending executions that affect in a general way to their assets.

3. That they are not in the process of the hasty or ruinous liquidation of their assets.

4. That he/she is not immersed in a generalized noncompliance of obligations of any of the following types:

a) Payment of tax obligations due during the three months prior to the request for insolvency proceedings.

b) Payment of Social Security contributions, and other concepts of joint collection during the same period;

c) Payment of salaries and indemnities and other remuneration derived from the employment relationship.

Si te ha interesado este artículo no dudes en leer:

First demand guarantees

The guarantee on first demand (on first demand) has been the best possible guarantee for many years. Another surprising Judgment questions it now.

Loan Conditions

In the case of SMEs and the self-employed, the guarantee will amount to a maximum of 80% of the transaction. For these purposes, SMEs are considered to be companies with less than 250 employees. With an annual turnover not exceeding 50 million, or with an annual balance sheet not exceeding 43 million.

In companies other than SMEs, the guarantee will amount to 70% of new operations and 60% of renewal operations.

Interest rates

Interest rates on the total amount guaranteed range from 20 to 120 basis points:

SMEs:

1. New Operation or Renewal up to €1.5 million interest of 20 basis points.

2. New Operation or Renewal for an amount exceeding €1.5 million.

2.1 Transaction with a maturity of up to 1 year, interest at 20 basis points annually.

2.2 Transaction with a maturity of 1-3 years, interest of 30 basis points annually.

2.3 Transaction with maturity between 3-5 years, interest at 80 basis points annually

Non-SMEs

1. New operations or renewals up to €1.5 million, interest at 20 basis points annually

2. New operations over 1.5 million €.

2.1 Transaction with a maturity of up to 1 year, interest at 30 basis points annually

2.2 Transaction with maturity between 1-3 years, interest at 60 basis points annually

2.3 Transaction with a maturity of 3-5 years, interest at 120 basis points annually.

3. Renewal of operations in excess of €1.5 million

3.1 Transactions with a maturity of up to 1 year, interest at 25 basis points annually

3.2 Transaction with a maturity of 1-3 years, interest at 50 basis points annually

3.3 Transaction with maturity between 3-5 years, interest of 100 basis points annually

Deadlines

The current maximum term (although it could be extended) to apply for these loans is September 30, 2020.

The term will be the term of the operation, but always with a maximum of 5 years.

If this article has been of interest, we also suggest you to read the following article published on our website:

Validity of contracts in coronavirus period.