Spanish Royal Decree-Law 8/2020 set forth that the Spanish Ministry of Economic Affairs and Digital Transformation would provide guarantees for the financing granted by credit institutions, finance companies, e-money institutions and payment institutions to companies and the self-employed, to help them meet their invoice management and working capital requirements, financial or tax obligations and other liquidity needs. The maximum amount approved was 100,000 million Euros.
In its meeting held on 24 March 2020, the Council of Ministers approved the Resolution that sets out the applicable conditions and requirements to be met for the first round of the Guarantee Scheme for companies and the self-employed, for an amount of up to 20 billion Euros, of which:
10 billion Euros will be earmarked for SMEs (companies employing less than 250 persons and with an annual turnover not in excess of 50 million Euros or with an annual general balance sheet not in excess of 43 million Euros) and the self-employed and 10 billion for companies which are not regarded as SMEs.
· Which transactions are covered by the Guarantee Scheme?
The Guarantee Scheme will guarantee new loans and other types of financing, as well as the renewals thereof, granted by financial institutions to companies and the self-employed to meet their financing requirements for salary and invoice payments, working capital requirements and other liquidity needs, including those arising from financial or tax obligations.
This Scheme is managed by the Instituto de Crédito Oficial (Spanish Official Credit Institute) in partnership with financial institutions.
The loans and transactions must have been arranged and entered into or renewed after 17 march 2020.
· Who is eligible?
Any company or self-employed person affected by the economic effects of COVID-19 can apply for these guarantees, provided that the applicant is not listed as being in default in the register of the Bank of Spain’s Risk Information Centre (CIRBE) as of 31 December 2019, or subject to insolvency proceedings as of 17 March 2020, or facing any other situation that has allowed a creditor to apply for insolvency.
· What period does the guarantee apply to?
Companies and the self-employed can apply for the guarantee for their transactions up to 30 September 2020. To do so, they must contact the financial institutions with which the ICO has entered into the relevant agreements.
· How much does the guarantee cover?
Up to a maximum amount of 1.5 million Euros the specific provisions will apply of Commission Regulation (EU) No 1407/2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid.
For loans of more than 1.5 million Euros, up to the maximum amount established in the Temporary Framework for State Aid of the European Commission. On 19 March 2020 the European Commission approved a Communication in which it establishes a temporary framework setting out the conditions under which Member States of the Union may assist companies to combat the economic consequences of COVID-19.
· Risk analysis
Transactions of up to 50 million Euros will be approved by the relevant financial institution, which will take a decision in accordance with its internal procedures and policies on the granting of loans, notwithstanding any subsequent verifications regarding its eligibility requirements. The conditions of transactions in excess of 50 million Euros shall be previously checked by the ICO.
· Features of the Guarantee Scheme
(i) The guarantee will cover a maximum of 80% in the case of transactions requested by the self-employed and SMEs. In all other cases, the guarantee will cover 70% of the transaction and 60% of renewals.
(ii) The guarantee premium will be:
- Loans up to 1.5 million Euros: 20 bps.
- Loans of more than 1.5 million Euros to the self-employed and SMEs: 20 bps (for a 1-year maturity loan); 30 bps (for a 1-3 years maturity loan); and 80 bps (for a 3-5 years maturity loan).
- Loans of more than 1.5 million Euros to non-SMEs for new transactions: 30 bps (for a 1-year maturity loan); 60 bps (for a 1-3 years maturity loan); and 120 bps (for a 3-5 years maturity loan).
- Loans of more than 1.5 million Euros to non-SMEs for renewals: 25 bps (for a 1-year maturity loan); 50 bps (for a 1-3 years maturity loan); and 100 bps (for a 3-5 years maturity loan).
(iii) The guarantee issued will have a validity period equal to the term of the loan granted, subject to a maximum period of five years.
(iv) Financial institutions undertake to keep the costs of the new loans and the renewals eligible for these guarantees in line with the costs applied before the start of the COVID-19 crisis.
(v) Financial institutions also undertake to maintain, at least until 30 Septem ber 2020, the limits of the working capital facilities granted to all customers, in particular to those customers with guaranteed loans.
