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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 2018: (I) Enterprises and Entrepreneurs, (II) Mutual Guarantee Society Guarantee/State-owned Agricultural Surety Corporation, (III) Commercial Credit, (IV) Exporters 2018, (V) International Tranche I “Investment and liquidity”, and (VI) International Tranche II “Medium and Long-term Exporters”, whose most notable characteristics are:

— Línea ICO Empresas y Emprendedores 2018 (ICO Enterprises and Entrepreneurs Line):

Independent professionals and public and private enterprises- both Spanish and foreign – who make productive investments in Spain and/or need to cover their liquidity needs may apply for these loans.

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

The loans may be used to finance:

1. Liquidity: working capital needs such as current expenses, payroll, payments to suppliers, purchase of goods, etc.

2. Productive investments within Spain:

  • New or second-hand productive fixed assets (including VAT).
  • Cars whose price does not exceed €30,000 plus VAT. Industrial vehicles may be financed 100%.
  • Acquisition of enterprises.
  • Value added tax (VAT) or similar taxes.
  • Liquidity with a limit of 50% of the financing obtained for this form of investment.

The maximum amount that can be applied for is €12.5 million, in one or more transactions per client per year. Where used to finance “Investment”, it can be requested in the form of a loan or leasing arrangement, and where it is used to finance “Liquidity”, it will be requested in the form of a loan or line of credit.

Investments made prior to the execution of the operation can be financed, provided that their commencement date is not before January 1, 2017. As from the execution of the operation, the client has a one-year period in which to make the investment which is being 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 certain 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%.

The repayment period will be of 1, 2, 3 and 4 years, with the possibility of a grace period of up to 1 year, if 100% is used to finance “Liquidity”, and of 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 years, with a year grace period of up to 1 year, and of 12, 15 and 20 years, with a grace period of up to 2 years, if used to finance “Investment”. And for transactions relating to “Investment” and “Liquidity”, any of the repayment periods for “Investment” may be chosen.

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 0.5% 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 up to December 21, 2018.

— Línea ICO Garantía SGR/SAECA (Sociedad de Garantía Recíproca/Sociedad Anónima Estatal de Caución Agraria) 2018 (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 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, at Mutual Guarantee Societies or at the State-owned Agricultural Surety Corporation.

Loans may be used to finance:

1. Liquidity: working capital needs such as operating expenses, payroll, payments to suppliers, purchase of goods, etc.

2. Productive investments within Spain:

  • New or second-hand productive fixed assets (including VAT).
  • Cars whose price does not exceed €30,000 plus VAT. Industrial vehicles may be financed 100%.
  • Acquisition of enterprises.
  • Formation of enterprises abroad.
  • VAT or taxes of an analogous nature.
  • Liquidity up to a limit of 50% of the financing obtained for this form of investment.

Investments made before the execution date of the transaction can be financed, provided that the commencement date is not before January 1, 2017. After the execution date of the transaction, the client will have one year to make the investment for which the financing was obtained.

The maximum amount that can be applied for is €2 million, in one or more transactions per client and year. Where the financing is intended for “Investment”, it may be requested in the form of a loan or leasing arrangement and can finance up to 100% of the project, and where it is intended for “Liquidity”, it may be requested in the form of a loan of line of credit.

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%.

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

Thus, for example, if it chooses the 100% Liquidity line, it will be able to choose among repayment periods of 1, 2, 3 or 4 years, with the possibility of a 1-year grace period, while the choice of financing under an “Investment” transaction will enable it to choose among repayment periods of 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10, with the possibility of a grace period of up to 1 year, or repayment periods of 12 and 15 years, with the possibility of a grace period of up to 2 years. For loans used to finance “Investment” and “Liquidity”, any of the repayment periods stipulated for “Investment” may be chosen.

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 0.5% when it was formalized at a variable rate). If the early repayment is mandatory, the penalty accruing is 2% of the amount cancelled.

Transactions can be executed up to December 21, 2018.

— Línea ICO Crédito Comercial 2018 (ICO 2017 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 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 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 (6 months), the conditions and amount 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 mandatory early repayment, in which case a penalty equal to 1% of the amount cancelled will accrue.

Transactions can be executed with the credit institution up to December 21, 2018.

Lastly, given its purpose, the ICO 2018 International, Tranche I “Investment and Liquidity” Line, the lines relating to Exporters 2018 and International 2018 Tranche II “Medium- and Long-term Exporters”, and the ICO International Channel 2018 line will be examined in section 7 below, on “Internationalization Incentives”.

For more information in this connection, please see the ICO website: http://www.ico.es.