“Debts are paid”. With this resounding phrase the president of the Official Credit Institute (ICO), Jose Carlos Garcia de Quevedo, aims to clear up any doubts that may be arising regarding the granting of ICO credits -those that were granted with state guarantee during the pandemic to companies in trouble-. He does it after some SMEs are filing lawsuits against banks considering that there was malpractice.
The small companies that are undertaking legal processes criticize that the so-called ICO credits were marketed to them with the premise that they would only have to answer for 20% or 30% of the total, depending on the case, while the State would answer for the rest.
The truth is that these credits have a state guarantee of between 70% and 80%, which means that, in case of non-payment, the State would assume that percentage of delinquency, while the rest would fall to the bank. In any case, before the loan must respond in the first instance the company to which it is granted, as García de Quevedo explained in his intervention on Wednesday in the aAnnual Partners Luncheon CEAPI.
[La falta de un sistema de autorización de Hacienda a la banca impide reestructurar los créditos ICO de las empresas]
In this forum he stated that the ICO has not detected this problem among SMEs. “We have no record nor have we detected any malpractice on the part of financial institutions”said the president of the ICO, who stressed that the 1.2 million ICO credit operations were carried out “in general” in accordance with financial regulations.
Among those present at lunch was a small businessman -as he defined himself-. “We understood that there was a support of 80% of the ICO guarantee in the loans that were given in those moments of drama and confinement. In the event that a small businessman with a million euros does not pay, is the bank going to claim to the businessman or is he going to pay the ICO?”, this businessman asked the president of the institute.
“Debts are paid”
Faced with this question, García de Quevedo was blunt. “You, as an entrepreneur, have sufficient financial education and know that debts are paid”pointed out the president of ICO, in response to the businessman.
The head of the public entity explained that the objective of the ICO loans was for the financial conditions to be maintained during “an extreme situation” as if there had not been a health crisis.
[Las empresas con ‘créditos ICO’ apenas piden quitas y reestructuraciones tras medio año desde su aprobación]
“This objective was achieved so that, in extreme conditions of the health crisis, companies could maintain liquidity and activity through their Covid credits as if they were normal loans and we all know what is the treatment of normal loans in relation to the financial obligations of companies“, he added. In other words, before an ICO credit, one must respond as before another current one.
Something in which the dozens of SMEs that are going to court with these accusations do not agree, which criticize that at the time of the granting it was not correctly explained to them that they had to respond personally to 100% of the amount of the loan, but only before the part that did not have a guarantee, as reported by The confidential. These SMEs, around thirty, would be providing written evidence that this was the case.
Loan restructuring
The truth is that the default of the ICO credit is the last step that the entrepreneur can cling to. In order not to reach it, the Government approved in the summer of 2021 a Code of Good Practices for debt restructurings of these ICO credits.
It included alternative measures to non-payment, such as extending the maturities of these credits, converting them into participatory loans or executing debt write-offs. However, at least in the first months, companies practically did not resort to these measures, as this newspaper reported.
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