The Government thus complies within the established term with the commitment with companies, especially with self-employed workers and SMEs, to launch a Line of Guarantees to guarantee their liquidity and maintain productive activity and employment.
To guarantee liquidity until the start-up of this line, the Council of Ministers reinforced the ICO lines already in operation prior to the health emergency, doubling the specific line for the tourism sector to 400 million euros, which also extended to throughout the country, and increasing the lending capacity in the rest of the ICO lines by 10,000 million.
Characteristics of the Guarantee Line
The Guarantee Line was approved with an endowment of up to 100,000 million euros. The first tranche activated has an amount of 20,000 million euros, of which 50% is reserved to guarantee loans to the self-employed and SMEs.
Under the Line, the ICO will guarantee new loans and renewals granted by financial institutions to companies and the self-employed to meet the financing needs derived, among others, from payment of wages, invoices, need for money or other liquidity needs, including those derived from maturities of financial or tax obligations. The unifications and restructuring of loans, as well as the cancellation or early amortization of pre-existing debts, are excluded from the object of the Line.
Financial institutions must keep their customers' working capital lines open until September 30. In addition, they must transfer to their clients the benefit derived from the public guarantee, in the form of lower interests or longer terms, among other options. Likewise, they may not condition the approval of the loans to the contracting by the client of any other service or product.
To ensure an adequate distribution of guarantees between financial operators (credit institutions, financial credit institutions, payment institutions and electronic money institutions), a separate distribution of the two tranches has been approved.
In each of them, the amount will be distributed among each financial institution according to their market share at the end of 2019, on the one hand, in relation to credit to self-employed workers and SMEs and, on the other hand, to large companies, according to the information communicated by the Bank of Spain.
Financial institutions that at the end of 2019 did not have a credit balance registered with the Bank of Spain will also have access to this line. An added fee of 1% will be reserved for them.
As of April 30, the amounts of guarantees assigned and not used by the entities will be distributed among the rest of the operators that have exhausted their lines, proportionally to the amount of the guarantee that they would have used up to that date.
The guarantees granted by the ICO will cover the principal amount of the loan unpaid by the client, excluding other items, such as ordinary or default interest.
Once this first section of the Line of Guarantees has been used, the Government will enable a new section, the characteristics of which will be determined in due course, to ensure that liquidity continues to flow adequately towards the productive fabric.