ICO lines begin to overwhelm companies | Companies

Saturday, March 14, 2020. The Government decrees a state of alarm in Spain due to the coronavirus pandemic. The following Tuesday, March 17, the Council of Ministers approves a royal decree by which a line of State guarantees of up to 100,000 million euros is launched "to facilitate the maintenance of employment and mitigate the economic effects of the crisis health ”. 70% of the line is intended for SMEs and the self-employed. The Official Credit Institute (ICO) manages this aid, which is divided into tranches that have been approved.

“In general, we view these ICO lines with very good eyes. It is not a direct aid, but it allows SMEs to get into debt ”, declares the president of the Spanish Confederation of Small and Medium Enterprises (Cepyme), Gerardo Cuerva. Seven months later, the vision is different, given the events. "They were thought in anticipation of an economic recovery that has not arrived, they were conceived as a temporary window and now we continue to experience a decline in activity that we do not know when it will end," says Cuerva. The third and most recent Cepyme Barometer indicates that more than 90% of these companies have decreased their income due to the pandemic and that 48% have resorted or will do so to the ICO.

The main drawback of these loans, which SMEs request from financial institutions and which are 80% guaranteed by the State, are the terms. The lines have a grace period of one year, so they must start to be repaid as of March or April 2021, and they have a five-year amortization. “This is going to be impossible to fulfill because most companies are not going to have money; the problem is that the chain of payments is breaking down ”, explains the president of Cepyme. The Catalan employers' association of SMEs (Pimec) asks the Executive to extend the terms to six years of amortization and two years of grace period. "28.5% of the companies will not be able to face the repayment of the credits within the established term and 26.5% affirm that they do not know it," he reports.

Cepyme maintains that the aid was designed for a faster recovery

“People are distraught as the date to start making return payments approaches; business has not recovered, quite the contrary, "says José Antonio Aparicio, spokesman for the Madrid La Viña Hospitality Association. The hospitality industry, as in general all those that have to do with customer mobility, is one of those that is suffering the most from the economic crisis derived from the epidemic. In mid-September, the various national associations reported that the sector accumulated losses of 45% due to the decrease in activity, without the new restrictions having yet arrived.

Centennial tavern La Bola.
Centennial tavern La Bola.

For this reason, testimonies such as that of Mara Verdasco, owner of the emblematic Madrid restaurant La Bola, summarize the situation: "We do not know how we will be in a few months, our activity does not improve." This businesswoman, who has applied for several ICO loans because she owns four more establishments, claims: “I have no reference to know if I will be able to return the money. I had La Bola closed for six months, it was the first stop in the restaurant's 150-year history, which was open even during the Civil War. Now it works with half the capacity and we do not give dinners. The center of Madrid is a desert, many restaurants have closed definitively ”, he laments.

From the association of hoteliers of Madrid they say that "there are people very anguished"

The unanimous request is that both the grace period and the repayment terms be extended. The president of Cepyme points out that "we are in permanent contact with the Government, as we are also with financial institutions." Likewise, they transmit to the Executive "a whole series of measures aimed at reactivating demand, such as tax holidays and a reduction in VAT, and detailed plans by sectors that include direct aid."

Return times are not the only problems that SMEs are encountering. José Antonio Aparicio assures that in La Viña they collect daily complaints from their associates about the conditions of these credits that are imposed on them in some banking entities, among which the interest rates and the obligation to acquire other products to formalize the loan stand out.

There are cases in which you are obliged to accept added products as non-payment policies

Mara Verdasco exemplifies, once again, these facts and asserts that "the banks that give ICO loans set the interest that they deem appropriate and oblige small companies to contract other things to grant the financing."

The average interest rate detected by the Cepyme employer in these operations is around 2.5% for small companies and 1.5% for medium-sized companies, although it depends on each entity. José Antonio Aparicio points out that lines have been granted with up to 4.5% interest rate. Regarding the added products, the La Viña spokesperson says that “the obligation imposed on SMEs to hire them occurred a lot at the beginning, but the pressure from the associations has had its positive effects. Even so, there are those who continue with imaginative products, such as policies for non-payments of 800 euros ”, he details.

In the ICO they affirm that they always try to take
carry out best practices in the application of the lines

"As these are helplines for the Covid pandemic, they should be more agile," criticizes the spokesman for the Madrid hoteliers, adding that the ICO loans are guaranteed by the State "and, however, some banks are requesting additional guarantees from the appliers". The result is that it is very difficult for the most vulnerable companies to obtain this type of financing, which, in theory, is more accessible.


Even the Secretary of State for the Economy, Ana de la Cueva, has addressed the problem and two days ago declared that “we are aware that there are freelancers and companies that need a little more time to face their financial needs and we are analyzing for the next few months how to channel the instruments to do so in the best way and avoid a situation of instability for the economy and, above all, for SMEs ”. De la Cueva only anticipated that "the revision of the European Commission's temporary framework for public aid will allow us to address the issue in the coming months."

On the other hand, in the ICO they affirm that they always try to carry out the best practices in granting credits and that there are some that are not allowed, such as linking them to other products. In addition, in the organism they indicate that the lines do not establish grace periods.

The truth is that the situation, in terms of delinquency, is getting worse. According to a recent study by Informa, 60% of Spanish companies have experienced late payments since last March, with the consequent loss of liquidity.

In turn, the European Payments Report 2020 de Intrum places Spain among the countries where more companies, almost half (44%), are accepting longer payment terms to avoid bankruptcy, while 60% of companies admit that defaults affect their liquidity because reduces it.

The fall in supply and the collapse of demand, together with the decline in income, are leading to layoffs and business closures in small and medium-sized companies, according to this same report.

The numbers of the guarantees

ICO facade
ICO facade

Operations. The number of operations that have been endorsed until September 30, latest published data from the ICO, amounts to 823,847.

Business. More than 541,000 companies have applied for credits guaranteed by the ICO until October. The gap between the number of operations and the number of applicants is due to the fact that a single SME can request several of these loans, as has been the case with Mara Verdasco, owner of La Bola.

Amount. The total amount guaranteed until the 30th of last month, according to ICO data, is 77,617.5 million euros. 88% of this amount has gone to micro-SMEs and the self-employed.

Tourism and leisure. The sector that until September 30 has most benefited from the guarantee lines has been tourism, leisure and culture, with 153,974 operations corresponding to 116,632 companies.


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