What if I cannot repay my ICO loans?

The banking sector is worried about the end of the grace period for secured loans. It is expected that companies will wait until the beginning of this summer to estimate the requests for remission.

Here are a few points to bear in mind for the coming months, when the grace periods for guaranteed loans granted to companies with financial problems during the pandemic (COVID) begin to expire:

1) The ICO (Instituto de Crédito Oficial) supports the repayment of loans granted to entrepreneurs, both legal entities and the self-employed.

2) The action protocol asks banks to grant loans under certain conditions. In the event that these loans cannot be repaid, the state becomes a guarantor in case the entrepreneur is unable to repay.

3) The guarantee only covers 80 % or 70 % of the principal amount of the loan.

4) In the event of default, the debtor is liable. The State is only a guarantor. This means that before going for cover, the bank will do its best to collect from the debtor.

In addition, we must also take into account the forecast of major problems, remember that with the publication in the BOE of the Resolution of 30 November 2021, in addition to extending the deadline for applying for guarantees until 1 June 2022, the possibility of negotiating is also extended from 1 December 2021 to June 2022, provided that:

1) At the request of the debtor.

2) The guaranteed financing operation has not been unpaid for more than ninety days, nor has any of the other financing granted by the institution to the same customer.

3) The debtor must not feign a situation of default.

4) The financial institution has not notified the entity granting the guarantee of any non-payment of the guaranteed transaction with the debtor at the date of the application for the extension.

5) The debtor is not subject to bankruptcy proceedings.

6) The guaranteed financing has been concluded before 13 May 2021.

7) The debtor has not been convicted by final judgment for offences against the Public Treasury and Social Security.

8) Turnover, understood as the annual volume of operations declared or verified by the Administration in the corresponding annual tax form.

If the time comes and the situation is critical, what are the possibilities?

THE FIRST: Until June 2023, it can request direct transfers for the reduction of the principal or, in other words, debt write-offs.

SECOND: It can take the decision to convert the loan with public guarantee into a participative loan that is not convertible into capital.