ICO Credits: What Happens If You Can't Return It?

Publicly guaranteed loans from the Official Credit Institute (ICO) have been one of the main sources of funding for entrepreneurs and SMEs, which have been worst in this crisis. In this sense, given the risk of non-payment by many companies, ICO loans have been the center of some reforms of the system initiated by the government.

First in the month of November the expiration or grace period has been extended of ICO credits. And a few weeks ago, in March, a new royal decree included other situations, such as: the renegotiation of the terms or, if the loans cannot be repaid, a new special regime for this type of debt.

In these cases, ICO credits have been reformed in three fundamental aspects: On the one hand, the possibility that are considered financial liabilities in companies’ pre-insolvency agreements; on the other hand, in competition are considered in their entirety as ordinary loans, Loss of public credit privilege; and finally yours possible Exemption for natural persons.

Regarding the renegotiation of ICO credits, the new royal decree also includes three main novelties: the expiration extension of guarantees, yours Conversion into participation loan -Maintaining the public guarantee or granting it direct transfers Hold your debt. As explained The countryEntrepreneurs and financial institutions will have to enter into renegotiation agreements, the terms of which are still being worked out.

What happens if the ICO credits cannot be paid out?

Despite the new regulatory framework, the risk of default on ICO loans is unavoidable for many companies. In addition, “it is common for companies in difficulty, faced with financial crises, to stop paying the treasury before the supplier supplying the material. So, around 95% of insolvent companies have debts to public creditors“, explains a specialist lawyer to El País.

In this context, the experts demand that the administrations begin to support creditor agreements or refinancing agreements with public authorities more benevolently, which has not been completely ruled out, but has so far been difficult to enforce. Also, they explain how non-payment of ICO credits still has loopholes. “The moratorium exempts from the obligation to file challenges if the insolvency is due to Covid-19, but in this case we would face its tightening,” they point out. In this sense, they claim to deal with this problem and represent a uniform criterion for entrepreneurs.

covid-19, corporate loans, ICO loans, management