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When the first state of alarm and confinement was decreed in March last year, many self-employed workers were forced to stop their activity. They were left without income but having to face numerous expenses, so ICO credits were for many a lifeline.
The guarantees offered by the Government triggered the request for money from the Official Credit Institute by professionals. The long grace periods and repayment periods of this type of loan made them especially attractive for all those who, faced with an unexpected situation such as the pandemic, had to face payments to suppliers, rents, etc.
At that time very little was known about the virus and most citizens thought that in two or three weeks of confinement everything would be solved. The self-employed hoped to be able to be in charge of their businesses again in the month of April and thus be able to start obtaining their own income again that would allow them to survive and also repay the ICO loans.
But it soon became clear that the situation was not going to be quick or easy to fix. Many professionals were not able to open their businesses until June, and some have not even been able to return to work. All this has put the self-employed who at the time asked for a loan from the Official Credit Institute in a serious bind, because the time comes to pay back the loan and they hardly have any income.
Finally the terms of the ICOs are extended
On the extension of the grace period and the repayment of the money of the ICO loans, there has been a long and long dialogue in recent months, but no measures could be taken at the official level until the European Union has given its approval. Which, finally, has happened.
Now the Terms of repayment of the amounts can be extended up to three years more than what was initially agreed with the bank. But it must be taken into account that in case of extending the repayment term, the total period of time cannot exceed eight years from the formalization of the loan.
Regarding the grace period, this is extended for another twelve months over what was initially agreed, as long as the initial term does not exceed 24 months.
Requirements to request the extension of the deadlines
Those interested who have requested a loan endorsed by the ICO before November 18, 2020 have until May 15 to request the bank to extend the repayment or grace periods. However, it is not mandatory to increase the term, those who can face the return of what is due in a timely manner, can continue to pay normally.
The bank has the obligation to facilitate the procedures for professionals, and in no case can it condition the extension of the terms to the contracting of any additional service or product (insurance, a card or similar) or apply costs that are not justified.
So that this measure does not harm banking entities, it is established 50% deductions in the costs of fees and notarial expenses that the bank must assume.
For its part, the applicant for the extension of the terms must be up to date in complying with its obligations with the bank, both those derived from the ICO loan and debts of any other nature.
In addition, it is necessary that the self-employed person or employer does not appear as delinquent in the Central Registry of Risk Information of the Bank of Spain (CIRBE) at the time of requesting the extension and that the bank has not communicated to this Registry any non-payment of the debtor.
Lastly, the applicant cannot be immersed in a bankruptcy process, whether he is an entrepreneur or a self-employed person.
New rights for the ICO
The modification of Royal Decree-Law 8/2020 to introduce the extension of the grace period and refund also attributes to ICO the power to access CIRBE risk data.
Until now, the Official Credit Institute only followed up on operations that exceeded 50 million euros, but from now on you can access this information on delinquency more easily and quickly.
The reason for this measure is that the ICO offers a public guarantee. This means that if the self-employed person asks for the loan and does not pay it, the bank that has given it will go to the Official Credit Institute for it to pay the guaranteed amount. Then, the ICO starts the procedure to recover from the debtor the amount that it has stopped paying.
That a self-employed person who has requested a loan endorsed by the ICO leaves it unpaid is a problem for this organization. Hence, it is allowed to access CIRBE so that it can do a better risk analysis.
Why have the deadlines been extended?
Currently, some 550,000 freelancers and companies benefit from ICO loans. For this body it is acceptable that a low percentage of them do not return the amount owed, but if the delinquency rate is high this can be a serious problem.
The current economic situation is quite complicated, and as the health situation does not seem to improve significantly and restrictions continue to be applied that prevent the self-employed from developing their professional activity normally, the risk of default was becoming too high.
In order to curb non-performing loans, it has been considered more prudent to extend loan repayment terms. Thus the self-employed have an oxygen balloon and can delay the payment of their debts even a little more, waiting for the recovery to begin.
Although this measure is expected to be effective, there is no shortage of voices that point out that it may be insufficient. In fact, even the Bank of Spain itself has been in favor of forgiving certain debts to the self-employed.
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