COVID-19. Official Credit Institute (ICO) guarantees

The purpose of the guarantee facility is to help maintain employment and to alleviate the economic effects of COVID-19. It covers new loans and other forms of financing, as well as renewals granted by financial institutions to companies and the self-employed to meet their financing needs, such as those arising from the payment of salaries, invoices, working capital requirements and other liquidity needs, including those stemming from the maturity of financial and tax obligations.

The loans and transactions that may be guaranteed under the facility must have been arranged or renewed after 17 March 2020.

For the purposes of this resolution, financial institutions will be taken to be credit institutions, specialised lending institutions, electronic money institutions and payment institutions.

SMEs are defined as businesses which fulfil the criteria set out in Article 2, Annex I of Commission Regulation (EU) No 651/2014 of 17 June 2014, which states that the category of micro, small and medium-sized enterprises (‘SMEs’) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding €50 million, and/or an annual balance sheet total not exceeding €43 million.

The first activated tranche amounts to €20,000 million. It is divided into two parts of up to €10,000 million; one to guarantee loans for the self-employed and SMEs, and the other for larger companies.

Companies and self-employed persons with registered office in Spain that are impacted by the economic effects of COVID-19, provided that the borrowers were not in default (Central Credit Register) on 31 December 2019 or in bankruptcy proceedings on 17 March 2020.

Transactions of up to €50 million must be approved by the bank according to its risk policy (although their eligibility may be subsequently verified) and transactions above €50 million will be guaranteed once ICO has analysed compliance with eligibility conditions alongside the bank’s analysis.

The guarantee will cover 80% of new loans and transaction renewals requested by the self-employed and SMEs. For other companies, the guarantee will cover 70% of new loans granted and 60% of renewals.

It will be the same as the term of the loan granted, with a maximum term of five years.

The cost is set at between 20 and 120 basis points, depending on:

• whether the loan is less than or more than €1.5 million
• whether the borrower is self-employed, an SME or a non-SME company
• whether they are new loans or renewals

You can apply until 30 September 2020, although this deadline may be extended in the financial institutions with which the ICO has signed the corresponding collaboration agreements.

• Each institution will decide on the granting of the corresponding customer financing in accordance with its internal procedures and risk assumption policies.
• The financial institutions undertake to keep the costs of the new loans and renewals benefiting from these guarantees in line with the costs applied before the onset of the COVID-19 crisis, taking into account the government-backing of the guarantee and the cost of its coverage.
• They also undertake to maintain, at least until 30 September 2020, the limits of the working capital facilities granted to all customers and, in particular, those whose loans are guaranteed.
• They must also flag these transactions to ensure their traceability. This flagging will subsequently be included in their declaration to the Central Credit Register.