6Preferred 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.

Apart from other lines intended for certain specific sectors, the following are the main ICO lines of financing for 2022: (i) ICO Enterprises and Entrepreneurs; (ii) ICO Mutual Guarantee Society/State-owned Agricultural Surety Corporation Guarantee; (iii) ICO Commercial Credit; (iv) ICO Red.es Accelerate; (v) ICO Exporters 2022; (vi) ICO International 2022; and (vii) ICO International Channel 2022, whose most notable characteristics are:

• Línea ICO Empresas y Emprendedores 2022 (ICO Enterprises and Entrepreneurs Line):

  Among others, 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.

  Transactions wil be 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 (e.g., liquidity needs: current expenses, payrolls, payments to suppliers, purchases of goods, etc.).
  2. Technological requirements, such as, 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. Renovation or refurbishment of buildings, common elements and dwellings (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 a grace period of up to one year for the repayment of principle.
  2. Between 7 and 9 years, with 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% margin.
  • For forward transactions of 5 or more years: Fixed or variable interest rate plus a margin of up to 4.30%.

  As regards fees, the credit institution may charge a fee at the start of the transaction which, together with the interest rate set by the credit institution, may not exceed the maximum APR that the credit institution can apply to the transaction according to its term.

  In addition, where the transaction has been formalized at a fixed rate, a voluntary early repayment fee may be charged which will be 1% of the amount cancelled. On the other hand, where it has been formalized at a variable rate, a maximum fee of 0.50% will be charged, depending on the residual life of the transaction on the settlement date of the repayment.

  In the case of mandatory early repayment, a fee will be charged in respect of a penalty equal to 2% of the amount improperly formalized.

  Transactions can be executed with the credit institution throughout the whole of the year 2022 and the financing obtained will be compatible with any aid received from the autonomous communities and other institutions.

• Línea ICO Garantía SGR/SAECA (Sociedad de Garantía Recíproca/Sociedad Anónima Estatal de Caución Agraria) 2022 (ICO Mutual Guarantee Society Guarantee/State-owned Agricultural Surety Corporation Guarantee 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 will be 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. In fact, the Mutual Guarantee Society/State-owned Agricultural Surety Corporation and the credit institution itself to which the application is submittedwill be responsible for studying, processing, approving and/or rejecting the transaction.

  The financing may be used for:

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

  As regards fees, the Mutual Guarantee Society or State-owned Agricultural Surety Corporation may charge a study fee of up to 0.50% of the secured amount of the transaction. In addition, the credit institution may charge a fee at the start of the transaction.

  In the case of voluntary early repayments, a fee will generally be charged equal to 1% of the amount cancelled where the transaction has been formalized at a fixed rate. A maximum fee of 0.5% will be charged where it has been formalized at a variable rate, depending on the residual life of the transaction on the settlement date of the repayment. In the case of mandatory early repayments, a fee will be charged in respect of a penalty equal to 2% of the amount improperly formalized.

  The Mutual Guarantee Society may charge the client at the start of the transaction a fee of up to 4% of the secured amount of financing in respect of a mutual entity membership fee which will be returned to the client when the relationship ends. The Statute-owned Agricultural Surety Corporation does not charge a mutual entity membership fee.

  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 2022 and the financing obtained will be compatible with any aid received from the autonomous communities and other institutions.

• Línea ICO Crédito Comercial 2022 (ICO 2022 Commercial Credit Line)

  This credit line can be applied for by independent professionals and enterprises with registered office in Spain who (i) issue invoices arising from firm sales of goods and services to a debtor located within Spanish territory or (ii) have a supporting document agreed with another company with registered office in Spain whereby the purchasing company undertakes to acquire goods from the company applying for the financing.

  Specifically, such financing will be used to:

  • Obtain liquidity through the payment of advances on their billings in respect of their commercial activity within national territory.
  • 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 date of the transaction 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.

  The financial institution and the client may execute the financing agreement that the parties freely agree upon.

  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.

  The credit institution may establish a fee at the start of the transaction which, together with the interest rate set by the credit institution, may not exceed the maximum APR applicable to the transaction. In the case of a mandatory early repayment, a fee of 1% of the amount improperly formalized will be charged as a penalty.

  The Annual Percentage Rate (APR) applicable to the transaction will comprise the cost of the initial fee established by the credit institution plus the interest rate. The APR may not exceed the interest rate plus up to 2.30%.

  Transactions can be executed with the credit institution throughout the whole of the year 2022 and this financing will be compatible with other aid received from the autonomous communities or other institutions.

• Línea ICO Red.es Acelera (ICO Red.es Accelerate Line)

  The beneficiaries of aid indicated in the calls for applications published by Red.es such as, for example, companies, foundations, associations, professional associations, universities, technological centers and technological innovation support centers, etc., can apply for this financing.

  The financing can used for projects for which the grant of aid by Red.es is approved, in accordance with the rules of the relevant call for applications for aid. By way of example, these include:

  1. Experimental development projects, such as the creation of prototypes, the preparation of pilot projects or the testing and validating of new or improved products, processes and services in technologies such as artificial intelligence, 5G, mass data and information processing, blockchain, robotics, micro/nanoelectronics, 3D printing, digital content (specifically, the making available of data on a mass scale and in reusable formats, video games, audiovisual contents, etc.).
  2. Projects that foster the development, promotion and adoption of digital technologies that can stimulate demand, as well as the development of projects that drive growth and entrepreneurship in the technological field.

  The transactions will be processed directly through credit institutions that partner with the ICO in this product and such credit institutions will decide whether or not to grant the financing. Beforehand, the client must have obtained approval for the project and the related aid at Red.es, on the dates and the terms set in the relevant call for applications.

  The financing will take the form of a loan and may cover up to 100% of the amount of the project (less the amount of any advance payment if requested) with the following repayment and grace periods:

  • From 1 to 6 years with the possibility of a grace period of up to one year for the repayment of principal.
  • From 7 years with the possibility of a grace period of up to 2 years.

  As regards the applicable interest rate, the client can choose between a fixed and variable interest rate. If the transaction was formalized 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 credit institution may charge a fee at the start of the transaction, the cost of which, together with the interest rate, may not exceed the maximum APR that the credit institution may apply to the transaction according to its term. In addition, a fee for voluntary early repayment may be applied equal to 1% of the amount cancelled if the transaction has been formalized at a fixed rate. Where it has been formalized at a variable rate, the credit institution may apply, depending on the residual life of the transaction, a maximum fee:

  • Of 0.05% to transactions with a residual life of up to 2 years.
  • Of up to 0.15% to transactions with a residual life greater than 2 years and less than 5 years.
  • Of 0.40% to transactions with a residual life greater than 5 years.

  In the case of mandatory early repayment, a fee will be charged in respect of a penalty equal to 2% of the amount improperly formalized.

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

  Transactions can be formalized with the credit institution up to March 31, 2024 and the financing obtained will be compatible with the receipt of other subsidies or aid for the same eligible project originating from any government or public entity provided that the regulatory orders or legislation applicable in each case so permits.

  Mention should also be made of the Guarantee Lines also offered by the ICO, including most notably, for 2022, the following: (i) Guarantee Line for independent professionals and enterprises pursuant to Royal Decree-Law 8/2020, and (ii) Guarantee Line for Investment pursuant to Royal Decree-Law 25/2020.

• Guarantee Line for independent professionals and enterprises pursuant to Royal Decree-Law 8/2020

  Pursuant to the provisions of article 29 of Royal Decree-Law 8/2020, of March 17, 2020, the Spanish government approved a special Guarantee Line of up to €100 billion from the Ministry of Economic Affairs and Digital Transformation to facilitate the maintenance of employment and alleviate the economic effects stemming from the recent health crisis caused by COVID-19.

  Specifically, this Guarantee line managed by the ICO seeks to make it easier for enterprises and independent professionals to access credit and liquidity to alleviate the economic effects of COVID-19, thereby guaranteeing liquidity and covering their working capital needs.

  Through the Resolutions of the Council of Ministers of March 24, April 10, May 5 and 19 and June 16, 2020, the Spanish government has been activating the different tranches of the line in the amount of €20 billion (the first four) and €7.5 billion (the last one), of which €2.5 billion are earmarked for enterprises in the tourism sector and connected activities for SMEs and independent professionals and €500 million are earmarked to cover the acquisition or financial or operating lease by enterprises and independent professionals of land transportation vehicles for professional use.

  This Guarantee Line covers new loans and other forms of financing as well as the renewals of loans already granted by financial institutions to meet enterprises’ financing needs aimed at covering (i) wage payments; (ii) unsettled invoices from suppliers; (iii) rent for premises, offices and facilities; (iv) utilities expenses; (v) need for working capital; and (vi) other liquidity needs including those arising from financial or tax obligations that have fallen due. However, this Line cannot be used for loan consolidation or restructuring or the cancellation or prepayment of pre-existing debts.

  Enterprises and independent professionals from any business sector that have their registered office in Spain and that have been affected by the COVID-19 economic crisis can avail themselves of this Line, provided that:

  • The loans and transactions have been formalized or renewed on or after March 18, 2020.
  • The enterprises and independent professionals: (i) are not in default according to the files of the Bank of Spain's Risk Information Center (CIRBE) as of December 31, 2019; (ii) are not subject to insolvency proceedings as of March 17, 2020, either because they have filed an insolvency petition, or because the circumstances referred to in article 2.4 of Insolvency Law 22/2003, of July 9, 2003, exist for an insolvency order to be requested by their creditors; or, (iii) where the European Union’s State Aid Temporary Framework applies, they do not qualify as a distressed enterprise as of December 31, 2019 in accordance with the criteria set out in article 2(18) of Commission Regulation (EU) No 651/2014 of June 17, 2014 declaring certain categories of aid compatible with the internal market.

  Financial institutions can apply for the guarantee for loans and transactions signed with independent professionals and enterprises that are formalized or renewed on or after March 18, 2020. The maximum amount of the loans that can be guaranteed under this line will depend on the limits established in the applicable European legislation on state aid (and, therefore, on whether or not they meet the requirements of Commission Regulation (EU) No. 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid or of the Temporary Framework for State aid approved by the European Commission).

  The maximum term of the guarantees (not yet released) has been extended from a maximum term of 5 to 8 years following the approval of the Resolution of the Council of Ministers of November 24, 2021. In these cases, the term of the guarantee issued will coincide with the term of the transaction.

  Lastly, the period for requesting any of the guarantees described here has been extended to June 1, 2022 by the Resolution of the Council of Ministers of November 30, 2021.

• Guarantee Lines for Investment pursuant to Royal Decree-Law 25/2020

  Pursuant to article 1 of Royal Decree Law 25/2020, of July 3, 2020, the Spanish government approved a Guarantee Line of €40 billion from the Ministry of Economic Affairs and Digital Transformation in order to secure the financing granted to enterprises and independent professionals aimed mainly at meeting their financing needs stemming from new investments.

  Through the Resolutions of the Council of Ministers of July 28, November 24 and December 22, 2020 and May 28, 2021, the Spanish government has activated six tranches of this financing line, of which some will be managed by the ICO.

  Specifically:

  1. First tranche, endowed with: €8 billion, split into two subtranches:
     • Up to €5 billion to secure the financing granted to independent professionals and SMEs to meet their liquidity needs and, in particular, those stemming from new investments.
     • Up to €3 billion to secure the financing granted to enterprises that do not have SME status to meet their liquidity needs.
  2. Second tranche, for an additional €2.55 billion to secure financing transactions for enterprises and independent professionals that are in the execution phase of an arrangement with creditors within an insolvency proceeding, but that are up to date with their obligations in accordance with the arrangement and can prove it with a report from the court or the insolvency manager.

     A subtranche of €50 million is also included to secure issues of promissory note programs on the MARF.

  3. Third tranche, endowed with an additional €250 million to secure promissory notes issued on the MARF by enterprises that could not avail themselves of the tranche made available in the first Line since their promissory note program was in the renewal phase.
  4. Fourth tranche, endowed with €500 million, aimed at securing the financing granted to SMEs and independent professionals in the tourism and hospitality industry and connected activities to meet their needs stemming from new investments, as well as liquidity needs.
  5. Fifth tranche, endowed with €500 million to reinforce the guarantees from CERSA and to increase the capacity of the Mutual Guarantee Societies.
  6. And a sixth tranche, in the amount of €15 billion, of which €10 billion will be targeted at SMEs and independent professionals, at non-SMEs and earmarked for guaranteeing financing granted to make investments that support the recovery of the Spanish economy, and for covering their liquidity needs.

  Specifically, this Guarantee Line seeks to foster and support the grant of fresh financing to independent professionals and enterprises by financial institutions so that such independent professionals and enterprises can make new investments in Spain, aimed at (i) adapting, extending or renewing their production and service capacities, or (ii) restarting or reopening their business.

  The financing obtained by independent professionals and enterprises must be used for one or more of the following purposes: (i) new investment within Spain, including current and capital expenses linked to the investment, provided that the latter are justified, where “new investment” means that made in first-use or second-hand assets, acquired (with first invoice date) on or after July 29, 2020, VAT or analogous tax included; (ii) investment and/or current and capital expenses aimed at extending, adapting or renewing production or service capacities; (iii) investment and/or current and capital expenses aimed at restarting or pursuing the business; (iv) current and capital expenses associated with or aimed at, among others, acquiring, renting, leasing – under a finance or “renting” arrangement – equipment, machinery, facilities, supplies of materials and goods and services related to the investment and/or activity of the enterprise; and (v) billing needs arising, among others, from wage payments, invoices or current maturities of financial or tax obligations. However, this Line cannot be used for loan consolidation or restructuring or the cancellation or prepayment of pre-existing debts.

  Enterprises and independent professionals from any business sector that have their registered office in Spain and that have been affected by the COVID-19 economic crisis can avail themselves of this Line, provided that:

  1. The loans and transactions have been formalized or renewed on or after July 29, 2020.
  2. The enterprises and independent professionals: (i) are not in default according to the files of the Bank of Spain's Risk Information Center (CIRBE) as of December 31, 2019; (ii) are not subject to insolvency proceedings as of March 17, 2020, either because they have filed an insolvency petition, or because the circumstances referred to in article 2.4 of Insolvency Law 22/2003, of July 9, 2003, exist for an insolvency order to be requested by their creditors; or, (iii) where the European Union’s State Aid Temporary Framework applies, they do not qualify as a distressed enterprise as of December 31, 2019 in accordance with the criteria set out in article 2(18) of Commission Regulation (EU) No 651/2014 of June 17, 2014 declaring certain categories of aid compatible with the internal market.

  Financial institutions can apply for the guarantee for loans and transactions signed with independent professionals and enterprises that have been formalized or renewed since July 29, 2020.

  The maximum percentage of coverage of the guarantee varies according to who applies for it:

  • In the case of independent professionals and SMEs, the guarantee will amount to a maximum of 80% of the transaction.
  • For other enterprises that do not have SME status, the guarantee will cover 70% of the principal of the transaction at the most.

  New loans formalized under this guarantee program can be combined with other transactions that already have the State Guarantee in accordance with Royal Decree 8/2020, which should be taken into account by the institutions and clients with respect to eligibility, limits and verification.

  Transactions up to €50 million which have been approved by the institution in accordance with its risk policies will be guaranteed, subject to subsequent verifications regarding their eligibility conditions.

  Transactions exceeding €50 million will be guaranteed once the ICO has analyzed the fulfillment of the eligibility conditions supplementing the financial institution’s analysis.

As for the period for requesting the guarantees, it has been extended to June 1, 2022 by the Resolution of the Council of Ministers of November 30, 2021.

It should also be noted that, in addition to the above guarantee lines granted as a result of COVID-19, the Council of Ministers approved, through Royal Decree-Law 5/2021 of March 12, 2021, a package of measures aimed at making loans that have the State guarantee more flexible, for the renegotiation of enterprises’ and independent professionals’ debt with financial institutions that comply with the Code of Good Practices regulated under the Resolution of the Council of Ministers of May 11 and the Resolution of the Council of Ministers of November 30.

Lastly, given its purpose, the ICO 2022 International, Tranche I “Investment and Liquidity” Line, the lines relating to Exporters 2022 and International 2022 Tranche II “Medium- and Long-term Exporters”, and the ICO International Channel 2022 line will be examined in section 7 below, on “Internationalization Incentives”.

For more information in this connection, please see the ICO website.