Today, the Council of Ministers approved an Agreement that includes the features of the first section of the Line of Guarantees for the self-employed and businesses of an amount of up to 20,000 million euros, covered by Royal Decree Law 8/2020 on extraordinary urgent measures to combat the economic and social impact of COVID-19.
In this way, the Government complies with its commitment to companies, especially to self-employed workers and SMEs, to implement the necessary measures to guarantee their liquidity and preserve productive activity and employment.
With this aim in mind, the Guarantee Line will guarantee new loans and renewals granted by financial entities to companies and the self-employed in order to meet the financing needs arising, amongst other things, from payment of wages, invoices, liabilities or other liquidity needs, including those arising from maturities of financial or tax obligations.
This Line will be managed by the Instituto de Crédito Oficial, in collaboration with financial entities.
Guarantee Line Features
The Guarantee Line was approved with an provision of up to 100,000 million euros. The first section activated in today's agreement is of the amount of 20,000 million euros, of which 50% will be reserved to guarantee loans to the self employed and SMEs.
The self-employed and companies that have been financially affected by COVID-19 may request these guarantees, provided that the applicants were not in default on 31 December, 2019 or in the process of bankruptcy on 17 March, 2020. The guarantees will be retroactive and may be requested for transactions formalised after the entry into force of Royal Decree-Law 8/2020, which took place on 18 March.
The guarantee will guarantee 80% of new loans and renewals of transactions requested by the self-employed and SMEs. For other companies, the guarantee will cover 70% of the new loan granted and 60% of the renewals.
The guarantee issued will be valid for the term of the granted loan, with a maximum term of five years. The cost of the guarantee, between 20 and 120 basic points, will be assumed by the financial entities.
Interested companies and self-employed people may request the guarantee for their transactions until 30 September, 2020. To do this, they should contact the financial entities with which ICO has signed corresponding collaboration agreements.
The financial institutions commit to maintaining the costs of new loans and renewals that benefit from these guarantees in line with the costs applied before the start of the COVID-19 crisis.
They also commit to maintaining, at least until 30 September, 2020, the limits of the revolving credit lines granted to all clients and, particularly, to those clients whose loans are guaranteed.