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6. Preferred financing of the Official Credit Institute (Instituto de Crédito Oficial or ICO)

Consistent with its objective to contribute to economic growth and to the improvement of the distribution of national wealth, the ICO cooperates with other national and international bodies and institutions which work for the benefit of industries which, given their social, cultural, innovative or ecological significance, merit priority attention.

Thus, for a number of years the ICO has been executing multilateral institutional and/or financial cooperation agreements with similar bodies, Autonomous Communities, ministries and financial institutions with a view to helping Spanish enterprises start up new investment projects.

Notwithstanding other lines intended for certain specific sectors, the following are the main ICO lines of financing for 2020: (i) Enterprises and Entrepreneurs; (ii) Mutual Guarantee Society Guarantee/State-owned Agricultural Surety Corporation; (iii) Commercial Credit; (iv) Exporters 2020; (v) International Tranche 2020 I “Investment and liquidity”; and (vi) International 2020 Tranche II “Medium and Long-term Exporters” and (viii) International Channel 2020 whose most notable characteristics are:

  • Línea ICO Empresas y Emprendedores 2020 (ICO Enterprises and Entrepreneurs Line):

    Independent professionals and public and private enterprises - both Spanish and foreign - who carry on their business activity in Spain may apply for these loans, irrespective of where their registered office for commercial or tax purposes is located and of whether the greater part of their capital is Spanish or foreign.

    They may also be applied for by private individuals, owners’ associations (and groupings of such associations) for the renovation of residential properties and buildings or the refurbishment of communal features thereof.

    Transactions are processed directly via credit institutions with which the ICO has executed a cooperation agreement for the implementation of this line.

    The financing (which can take the form of loan, leasing arrangement, renting arrangement of line of credit) may be used for:

    1. Investment projects and/or general requirements of the activity, including liquidity needs to cover items such as current expenses, payrolls, payments to suppliers, purchases of goods, etc.
    2. Technological requirements, in particular, the digitalization projects to promote teleworking set forth in the SME Acelera Program.
    3. Acquisition of new or second-hand fixed assets.
    4. Passenger cars and industrial vehicles.
    5. The fitting-out and refurbishment of installations.
    6. Acquisition of businesses.
    7. The renovation or refurbishment of buildings, communal features and residential properties (VAT or similar taxes included), in the case of owners’ associations, groupings of owners’ associations and private individuals.

    The maximum amount per client and year will be 12.5 million euros, in one or more transactions, while the repayment and grace periods will range between one of the following options:

    1. Between 1 and 6 years, with the possibility of a grace period of up to one year for the repayment of principle.
    2. Between 7 and 9 years, with the possibility of a grace period of up to two years.
    3. Of 10, 12, 15 and up to 20 years, with a grace period of up to three years.

    The foregoing periods will apply independent of the items that are to be financed.

    Regarding the applicable interest rate, the client can choose between a fixed or variable rate. In the latter case, the interest rate will be reviewed weekly by the credit institution in accordance with the provisions of the related financing agreement.

    The Annual Percentage Rate (APR) applicable to the transaction comprises the cost of the initial fee applied by the credit institution plus the interest rate, and cannot surpass the following limits:

    • For 1-year forward transactions: fixed or variable interest rate plus a 2.30% margin.
    • For 2- and 3- or 4-year forward transactions: fixed or variable interest rate, plus a 4.00% margin.
    • For forward transactions of 5 or more years: fixed or variable interest rate plus a margin of up to 4.30%.

    With regard to fees, it should be noted that credit institutions can charge a fee at the start of the operation, although the cost of such fee plus the interest rate may not exceed the maximum APR which the institution is able to apply based on the term.

    Lastly, an early repayment fee may be applied (voluntary –which in general will be 1% of the amount cancelled, if the transaction was executed at a fixed rate, and of between 0.05% and 0.8% if it was executed at a variable rate- or mandatory, in which case it is 2% of the amount cancelled).

    Transactions can be executed with the credit institution throughout the whole of the year 2020.

  • Línea ICO Garantía SGR/SAECA (Sociedad de Garantía Recíproca/Sociedad Anónima Estatal de Caución Agraria) 2020 (ICO Mutual Guarantee Society Guarantee/State-owned Agricultural Surety Corporation Line):

    Independent professionals, public and private enterprises and entities that have a guarantee or surety from a Mutual Guarantee Society or the State-owned Agricultural Surety Corporation, regardless of their registered office or tax domicile or of the nationality of their capital, can apply for these loans to make productive investments inside or outside Spain and/or to cover their liquidity needs.

    However, an entity applying for financing to make an investment outside Spain and/or to cover liquidity requirements must be domiciled in Spain or its capital must be at least 30% Spanish owned.

    These transactions are processed directly through credit institutions with which the ICO has executed a cooperation agreement for this product, vis-à-vis Mutual Guarantee Societies or vis-à-vis the State-owned Agricultural Surety Corporation.

    The financing may be used for:

    1. Liquidity needs: In particular, working capital needs to attend to operating expenses, payroll, payments to suppliers, purchase of goods, etc.
    2. Productive investments inside and outside Spain:
      • Acquisition of new or second-hand fixed assets.
      • Passenger cars and industrial vehicles.
      • Fitting out and refurbishment of installations.
      • Acquisition of businesses.
      • Formation of businesses.

    The maximum amount that can be applied for is 2 million euros, in one or more transactions per client and year.

    The financing may be formalized in the form of a loan, leasing arrangement or line of credit and, when its intended purpose is “Investment”, up 100% of the project can be financed. The Mutual Guarantee Society/State-owned Agricultural Surety Corporation may decide the amount of the transaction to be guaranteed, which may be up to 100%.

    The client will be able to choose from among various repayment periods and grace periods, depending on the use to be given to the financing:

    1. Between 1 and 6 years, with the possibility of a grace period of up to one year for the repayment of principal.
    2. Between 7 and 9 years, with the possibility of a grace period of up to two years.
    3. Of 10, 12 and 15 years, with a grace period of up to three years.

    The foregoing will apply independent of the items that are to be financed.

    As regards the applicable interest rate, the client may choose between a fixed or variable rate. If the transaction is carried out at a variable interest rate, the rate will be reviewed half-yearly by the credit institution in accordance with the provisions of the financing agreement.

    The maximum annual cost of the transaction will the sum of the amount of the initial fee and the interest rate established by the credit institution, plus the cost of the Mutual Guarantee Society guarantee (without considering the application/opening fee applied to the client). This maximum annual cost may not exceed (i) the fixed or variable interest rate plus up to 2.3% for forward transactions equal to 1 year; (ii) the fixed or variable interest rate plus up to 4% for forward transactions of 2, 3 or 4 years; and (iii) the interest rate (whether fixed or variable) plus up to 4.30% for forward transactions equal to or over 5 years.

    The Mutual Guarantee Society/State-owned Agricultural Surety Corporation or the credit institution, as the case may be, may charge an application fee equal to 0.5% of the amount guaranteed. Additionally, the Mutual Guarantee Society may charge a fee based on the amount guaranteed and up to 4% in respect of a mutual society fee, such amount being refundable when the client terminates its relationship with the Mutual Guarantee Society. The State-owned Agricultural Surety Corporation does not charge a mutual society fee.

    Finally, the Credit Institution may charge a single fee at the start of the operation and, in the event of voluntary early repayment), a cancellation fee (generally 1% of the amount cancelled when the transaction was formalized at a fixed rate, and between 0.05% and 0,8% when it was formalized at a variable rate). If the early repayment is mandatory, the penalty accruing is 2% of the amount cancelled.

    The Mutual Guarantee Society, the State-owned Agricultural Surety Corporation ant the credit institution will evaluate the application for financing and, having regard to the applicant's solvency and the project's viability, may require the provision of guarantees.

    Transactions can be executed throughout the whole of 2020.

  • Línea ICO Crédito Comercial 2020 (ICO 2020 Commercial Credit Line)

    These loans can be applied for by independent professionals and enterprises with registered office in Spain who seek (i) to obtain liquidity through the payment of advances on their billings in respect of their commercial activity within national territory, or (ii) to cover prior production or manufacturing costs of goods or services sold in Spain.

    The advance payment of invoices with a maturity of not more than 180 days after the transaction’s execution date can be made. Similarly, pre-financing can be provided to meet the business’s liquidity needs to cover the costs of production and manufacturing of goods or services sold in national territory. The pre-financing operation must in any event be cancelled prior to formalizing an operation for the payment of advances on billings in respect of assets for which pre-financing was provided.

    Transactions are processed directly through credit institutions with which the ICO has executed a cooperation agreement for this product.

    Up to 100% of the amount of the invoice can be financed, provided that it does not exceed the maximum amount of 12.5 million euros of outstanding balance per client per year, in one or more installments.

    As regards the applicable interest rate, a variable interest rate will be applied, the conditions, dates and settlement method being those agreed upon with the credit institution in the corresponding financing agreement.

    As for fees, the credit institution may charge an initial fee at the start of the operation, although the cost of such fee plus the interest rate established may not exceed the maximum APR which the credit institution is able to apply (interest rate plus up to 2.30%). However, no additional fee can be charged to the client, except in cases of voluntary early repayment (in which case a fee equal to 0,05% of the amount cancelled may be charged) or mandatory early repayment (in which case a penalty equal to 1% of the amount incorrectly formalized will accrue).

    Transactions can be executed with the credit institution throughout the whole of the year 2020.

  • Lastly, given its purpose, the ICO 2020 International, Tranche I “Investment and Liquidity” Line, the lines relating to Exporters 2020 and International 2020 Tranche II “Medium- and Long-term Exporters”, and the ICO International Channel 2020 line will be examined in section 7 below, on “Internationalization Incentives”.

    Lastly, please note that, pursuant to Royal Decree Law 8/2020, of March 17, 2020, a special Line of Guarantees has been approved to help enterprises to confront exceptional circumstances arising during the COVID-19 public health crisis. This Line of Guarantees, of which the first two tranches, each for an amount of 20 billion euros, have already been approved, are to be used to facilitate access to credit and to provide liquidity to enterprises, independent professionals and SMEs.

    In particular:

    • Tranche One, activated by Resolution of the Council of Ministers on March 24, 2020: 20 billion euros, divided among two subtranches:
      1. Up to 10 billion euros for renewals and new loans granted to independent professionals and SMEs.
      2. Up to 10 billion euros for renewals and new loans granted to enterprises not meeting the requirements to be an SME.
    • Tranche Two, activated by Resolution of the Council of Ministers on April, 2020: An additional 20 billion euros for renewals and new loans granted to independent professionals and SMEs.

    This second Line of Guarantees for enterprises and independent professionals from the Ministry of Foreign Affairs and Digital Transformation will be managed by the ICO through the financial institutions granting financing to enterprises and independent professionals with a view to mitigating the economic impact of COVID-19, securing liquidity and covering their working capital needs, with a view to upholding productive activity and employment.

    In particular, this Line of Guarantees can be used to cover new loans and other forms of financing, as well as renewals of those already granted by financial institutions in order to attend to financing needs such as (i) the payment of salaries; (ii) outstanding invoices of suppliers; (iii) rent for premises, offices and facilities; (iv) expenses incurred on supplies; (v) working capital needs; and (vi) other liquidity needs, including those arising from financial or tax obligations falling due. This Line cannot, however, be used to finance loan unifications and restructurings or the cancellation or early repayment of existing debt.

    Potential beneficiaries of this Line are independent professionals and enterprises in all industries, provided they have their registered office in Spain and have been affected by the economic impact of COVID-19 and that:

    1. The loans and transactions were executed or renewed after March 18, 2020.
    2. The enterprises and independent professionals:
      • Are not in default, in accordance with the files of the Bank of Spain Risk Information Center (CIRBE) as of December 31, 2019.
      • Are not subject to an insolvency proceeding as of March 17, 2020, either due to having petitioned for an insolvency order or to fulfilling the circumstances referred to in article 2.4 of Law 22/2003, of July 9, 2003, enabling their creditors to petition for the insolvency order.
      • Are not, where the European Union Temporary State Aid Framework applies, an “undertaking in difficulty” as of December 31, 2019, in accordance with the criteria established in article 2(18) of Commission Regulation No 651/2018 of 17 June 2014 declaring certain categories of aid compatible with the internal market.

      Financial institutions may request the guarantee for loans and transactions executed or renewed with independent professionals and enterprises between March 18, 2020 and September 30, 2020. Nonetheless, this period can be extended, at all times in line with the EU regulations on State Aid, by Resolution of the Council of Ministers. For more information in this connection, please see the ICO website: http://www.ico.es.