Guidelines on applying for solvency support measures for companies and the self-employed
On 17 November, the Council of Ministers approved a new set of urgent measures to support the liquidity and solvency of companies and self-employed workers affected by the economic fallout of the COVID-19 pandemic.
The measures adopted affect various areas and several refer to financing operations guaranteed by the State using ICO facilities.
We would remind potential beneficiaries that, to mitigate the economic and social fallout of COVID-19, two guarantee facilities have been approved:
- Guarantee facility of up to €100 billion. Approved by Royal Decree-Law 8/2020. Purpose: to grant access to credit and liquidity for companies and the self-employed. Guaranteed transactions: loans and transactions with companies and self-employed workers fulfilling certain conditions, originating or renewed between 18 March 2020 and 1 December 2020. The term of the guarantee issued shall match that of the transaction, up to a maximum of 5 years.
- Guarantee facility of up to €40 billion. (Approved by Royal Decree-Law 25-2020). Purpose: new financing for companies and self-employed workers whose main purpose is making new investments in Spain. Guaranteed transactions: loans and transactions with companies and self-employed workers fulfilling certain conditions, originating between 29 July 2020 and 1 December 2020. The term of the guarantee issued shall match that of the transaction, up to a maximum of 8 years.
These State guarantees are channelled through the Official Credit Institute (ICO).
What new measures have been launched in relation to these State-guaranteed financing operations?
- The deadline for applying for guarantees under the two above-mentioned facilities is extended to 1 June 2021.
- The maximum term for guarantees not yet granted and which may be granted in the future, under the facility approved by Royal Decree-Law 8/2020, is set at eight years.
- Companies and self-employed workers who have already been granted one of these guaranteed loans and meet certain requirements may request the following from their banks before 15 May 2021:
1 An extension of the maturity of the guaranteed transactions (loans, credit and other financing). The maximum term of the extension is three years. However, the total maturity of the guaranteed transaction may not exceed eight years from the date on which the transaction was signed. In the event the maturity of the transaction is extended, the State guarantee granted shall be extended by the same amount of time. This shall apply to transactions guaranteed under Royal Decree-Law 8/2020.
2 An extension of the payment holiday. The payment holiday can be extended by up to 12 months. However, the total duration of the payment holiday may not exceed 24 months from the date on which the transaction was signed. This shall apply to transactions guaranteed both under Royal Decree-Law 8/2020 and under Royal Decree-Law 25/2020.
3 Maintenance of the limits of the working capital facilities granted until 30 June 2021. This measure can only be requested if an application has been submitted for one of the above measures.
- Upon receiving these requests, financial institutions must:
- Apply the measure requested within a maximum of 30 days, provided the requirements set out in the following paragraph are met.
- Maintain the cost of the financed transaction. Thus, extending the maturity, the payment holiday or the duration of the limit of the working capital facilities should not increase the interest rate, commissions, etc. Only in the event that the extension makes the guarantee more expensive may banks reflect this increase by raising the cost of the guaranteed transaction.
- Not make the granting of the requested measures conditional upon purchasing other products from the bank.
- Apply best banking practices for the benefit of customers.
- Companies and self-employed workers requesting the above-mentioned measures must meet the following requirements:
- They must not be in arrears with their payments (more than 90 days past-due) in any of the financing transactions granted by the bank.
- They must not be registered as in default in the Banco de España’s Central Credit Register on the origination date of the requested extension.
- They must not be involved in insolvency proceedings.
- The bank shall not have notified the ICO of any non-payment of the guaranteed transaction on the origination date of the extension.
- They must have signed the guaranteed transaction before 18 November 2020 to be able to extend the maturity or the payment holiday.
- The limits set out in the European Union’s State aid rules must be observed with regard to extending the term of the guarantee.
- A complaint may be lodged with the Banco de España in the event of any disagreement with the actions of financial institutions in relation to the aforementioned obligations. These complaints shall follow the same procedure as any other complaint whose processing and resolution falls within the remit of the Banco de España.