Fri. Apr 3rd, 2020

The Government will guarantee 80% of the 20,000 million liquidity for SMEs and the self-employed

It is part of a 100,000 million credit line that will be managed by the Official Credit Institute. The State will cover to a lesser extent large companies, 70% in new loans and 60% in renewals

The Government approved on Tuesday the launch of a first tranche of guarantees of 20,000 million euros to guarantee the liquidity of the companies most affected by the coronavirus crisis, and half of that amount will serve to guarantee new loans to SMEs and Self-employed workers, where appropriate, the State will cover 80% of new loans and financing renewals, as explained by the Minister of Finance and government spokesperson, María Jesús Montero, at the press conference after the Council of Ministers. For the rest of the companies, he explained, the State guarantees 70% of the new financing granted by the banks and 60% of the renewal operations, this is the renewal of liquidity lines and not the refinancing of past loans.

Companies and freelancers affected by the economic effects of the coronavirus may request public guarantees, provided that at the end of 2019 they were not considered delinquent or have entered bankruptcy proceedings this year. The guarantees will be retroactive and may be requested for operations formalized after the entry into force of the royal decree-law on extraordinary measures, which occurred on March 18. Interested companies and freelancers may request the guarantee for their operations until September 30, 2020 and for this they must contact the financial entities with which the ICO has signed the corresponding collaboration agreements. The cost of the guarantee, between 20 and 120 basis points, will be assumed by financial institutions, underlines the department led by Nadia Calviño, but thanks to this guarantee it is assumed that the bank will be more willing to finance by sharing the risk.

Regarding the interest rate applied, financial institutions undertake to keep the costs of new loans and renewals that benefit from these guarantees in line with the interest they applied before the start of the crisis. They also undertake to maintain, at least until September 30, 2020, the limits of the working capital lines granted to all clients and, in particular, to those clients whose loans are guaranteed. The Government will monitor this first tranche of guarantees as the crisis progresses to decide when and under what conditions it releases other tranches, since it is willing to offer guarantees for up to 80,000 million more if necessary. Despite the fact that banks do not have any problem to grant financing at this time, the importance of the guarantees is that it facilitates the operation and allows, in the face of the current economic paralysis, freelancers, SMEs and companies to obtain liquidity for the payment of wages, bills , current or other liquidity needs, including maturities of financial or tax obligations. The guarantee issued will be valid for the term of the loan granted, with a maximum term of five years


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