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BOE 26 March: First round of ICO Line of Guarantees for the self-employed and businesses

31 March 2020

Resolution of 25 March 2020 of the Secretary of State for Economy and Business Support, announcing the Council of Ministers Agreement of 24 March 2020 passing the first round of ICO guarantees for businesses and the self-employed to alleviate the economic effects of COVID-19.

The sole purpose of said guarantees is to encourage financial institutions to provide credit to businesses and the self-employed through new loans and other means of financing to allow them to maintain employment and alleviate the devastating financial effects of COVID-19. Through these new lines of credit, businesses and the self-employed will be able to cover their funding needs arising from payment obligations in the form of wages, supplier invoices and creditors, financial debts, taxes, etc.

Total amount of the line of guarantees:
Article 29 of the regulation establishes a line of guarantees, earmarking a maximum of €100 billion.

First round:
The first round of guarantees is opened, with up to €20 billion earmarked for:

– up to €10 billion in new loans and renewals granted to SMEs and the self-employed.
– up to €10 billion in new loans and renewals granted to businesses not classified as SMEs.

Specifications of the line of guarantees:
The line of guarantees covers:

– Loans and financial operations granted to businesses and the self-employed officially based in Spain.
– Loans and operations granted or renewed after 17 March 2020.
– Recipients may not be on the list of debtors as posted with the Bank of Spain Central Credit Register (CIRBE) on 31 December 2019.
– Recipients may not be in bankruptcy proceedings as of 17 March 2020.
-The maximum amount shall be €1.5 million and it will be provided through one or several loan operations to businesses and the self-employed. These operations may be granted directly by financial institutions, without ICO approval.
-For SMEs and the self-employed, the guarantee will cover 80% of the operation.
– For businesses not classified as SMEs, the guarantee will cover no more than 70% of new operations and 60% of renewal operations.
– Interested parties can apply for these guarantees through 30 September 2020.
– The guarantees granted will be valid for the length of the operation, not to exceed 5 years.

Rights of financial institutions:
Financial institutions have full freedom to decide whether or not to grant a line of credit backed by ICO to its clients, according to their internal procedures and loan policies.

Obligations of financial institutions:

– The costs of the new loans, as well as any renewals benefiting from these guarantees, shall be in the same line as those before the COVID-19 crisis, taking into account the public guarantee and its coverage costs.
– Financial institutions undertake to maintain, at least until 30 September 2020, the revolving lines of credit granted to all clients and, particularly, to those clients whose loans are guaranteed.

Documents required for financial institutions to process the applications:
Depending on the type of applicant (self-employed, SME, medium or large company), the financial institution will require the standard documents established in the law on the prevention of money laundering, listed below:

– Form 036
– Certificate from the Companies House accrediting the company is based in Spain and the powers of the individual submitting the application.
– Articles of incorporation and current bylaws.
– Tax identification number.
– Last tax filing.
– 2018 annual accounts and close of 2019.
– Certificate showing the applicant is up to date on Social Security and tax payments.

Justification of the amount requested:
Financial institutions must attach a justification of the amount requested to the applications. In this regard, in order to ensure the financial institution and its credit department properly understand the real need for the amount requested, we recommend providing a financial/economic report, with proper documentation and verifiable figures and data (taxes, accounting records, orders, etc.) clearly showing the activity and main features of the business, as well as the various negative impacts expected from the COVID-19 crisis, in important variables such as:

– Revenue (cancelled orders, out of business, loss of production capacity, firings, etc.)
– Delay in payment of client balances (request for postponement, sectors that affected clients belong to, etc.)
– Restrictions on financial capacity to meet payments (payments that must be met in order to stay open or re-open in the near future, tax and labour obligations, etc.)
– Budget for expenses over the next 4-5 months
– Commitment to pay off existing bank debt
– Updated business plan
– Treasury projections

We are at your disposal to provide any further information or clarification you may need.

Mila Pedraza
Consulting Partner
Kreston Iberaudit


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