The Government will extend in six months the lack in the payment of ICO credits

The government plans to approve this Tuesday an extension of six months of the term of lack in the payment of the principal of the loans to companies with public endorsement of the ICO launched at the beginning of the pandemic. The maximum period in which the companies will only have to pay the interest, thus, will extend from the current two years. Most of these grace periods expired in April and Maywith what they will now do in October and November.

The measure, yes, will not be for companies of all types of economic activity, but for those of “most affected sectors” due to the crisis of energy prices stemming from the invasion of Ukraine. The same is applicable for the extension of the maximum period of expiration of the credits, which the Government is going to extend up to a maximum of 10 years from the current eight. It remains to be seen how the Executive defines which sectors it considers most affected by the crisis. According to financial sources, the farmingthe cattle raisingthe fishing and the road transport will be among them, according to financial sources.

The banks are waiting for it to check the impact of the measure in their accounts. Unless the European supervisory authorities allow otherwise, which today seems complex, extending the grace period is considered in accounting terms as a restructuring of credit and obliges entities to store supplies to face possible future losses, since it is understood that the default risk of the client increases.

The third financial measure to be approved by the Council of Ministers is a new line of credits guaranteed by the ICO endowed with 10 billion euros “to cover the needs of liquidity caused by the temporary increase in energy cost and of the fuelsSaid new loans will have a grace period in the payment of the principal of twelve months, as revealed on Monday by the economic vice president, Nadia Calviño.

Liquidity and investment

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At the end of February, the ICO lines for liquidity (endowed with 100 billion) and investment (40 billion) created by the pandemic they had endorsed 103.77 millionwhich had allowed companies to receive 136,360 million from banks (The State guarantees 80% of the amount to the self-employed and SMEs and 70% to large companies). The financial entities had approved 1,156,933 operations, of which more than 98% have been signed by small and medium-sized companies and self-employed workers. The application period ends on June 1.

The Government initially set, in March 2020, a maximum maturity of five years and a lack of 12 months for these loans. In November of that year, he allowed companies that requested it to extend said terms in three years and an additional 12 months, respectively. They accepted this measure – whose application period ended on May 15, 2021- 386,698 operationswhich represent approximately 43% of the total that could request it and around 50% of the guarantees and financing that had been mobilized until November 18, 2020. Additionally, the Executive approved in March of last year that the banks and companies could negotiate extensions of the term up to 10 years in certain cases, also until June 1.