19 Mar Extraordinary and urgent measures on financing support adopted by the Royal Decree – law 7/2020 and 8/2020
As a consequence of the global health crisis of COVID-19 and the declaration of the state of alarm, the Spanish government has adopted a series of urgent and extraordinary measures to facilitate the financing of mainly SMEs and self-employed workers who are affected by the closure of their business or the drastic reduction of turnover. These measures have been published in recent days by the Royal Decree-law 7/2020, of 12 March and the Royal Decree-law 8/2020, of 17 March, the main lines of which are as follows:
(i) Granting of guarantees: The Ministry of Economic Affairs and Digital Transformation shall grant guarantees for a maximum amount of 100 billion Euros to financing granted by credit entities, financial credit institutions, electronic money entities and payment entities to companies and self-employed workers to meet their needs regarding the management of invoices, working capital requirements, due dates of financial or tax obligations or other liquidity needs.
The applicable conditions and requirements to be met, including the maximum time limit for the application of the guarantee, will be established subsequently by agreement of the Council of Ministers.
(ii) Credit lines: In order to provide additional liquidity to companies, especially SMEs and self-employed workers, the net borrowing limit of the Official Credit Institute (“Instituto de Crédito Oficial” – ICO) is increased by 10 billion Euros, through the ICO credit lines.
In the tourism sector, the Thomas Cook credit line has been extended to cater for all companies established in Spain in the tourism sector, through a specific ICO Credit Line for the tourism sector and related activities. You can find more information here: https://www.ico.es/web/ico/ico-sector-turistico-y-actividades-conexas-
In the digitalisation of SMEs area, the ICO will finance over the next two years and with more than 200 million Euros, the purchase and leasing of equipment and services for the digitalisation of SMEs and teleworking solutions.
(iii) Extraordinary line of insurance cover: The creation of a line of insurance cover up to 2 billion Euros is authorised in order to ensure the working capital loans required for export activity, provided that they meet new financing needs and that the beneficiaries are SMEs and certain larger companies.
This line of coverage will include all types of commercial transactions, including domestic ones, whether they are for the supply of goods, the provision of services, or others that they carry out, provided that they are part of the commercial strategy of these companies, which must act preferably in the internationalisation area.
Coverage will be provided by the Spanish Export Credit Insurance Company (“Compañía Española de Seguros de Crédito a la Exportación, S.A., Cía. De Seguros y Reaseguros” -CESCE).
(iv) Deferral of reimbursement of loans granted the General Secretariat of Industry and Small and Medium sized Enterprises: Subject to certain requirements, the beneficiaries of concessions of the financial support instruments for industrial projects may request the deferral of the payment of the principal and/or interest of the current annuity.
Finally, and even though they are not measures to support financing, we would like to mention the measures in the field of public procurement to alleviate the consequences of COVID-19 that have also been adopted.
Subject to certain requirements, public services contracts, successive supplies and works, in force at the time of entry into force of Royal Decree-law 8/2020, and whose execution becomes impossible as a result of COVID-19 or the measures adopted by the State, the autonomous communities or the local administration to combat it, will be automatically suspended in the case of public services contracts and successive supplies until such time as their provision can be resumed. In the case of public works contracts, the contractor may request suspension, which will take place provided that the contracting authority has assessed that it is impossible to execute the contract.
As a consequence, the contracting entity must pay the contractor the damages and losses actually suffered during the period of suspension, after providing evidence of their reality, which will include (i) the salary expenses of the personnel assigned to the execution of the contract; (ii) the expenses for maintenance of the definitive guarantee; (iii) the expenses for rentals or maintenance costs of machinery, installations and equipment and (iv) the expenses corresponding to the insurance policies foreseen in the specifications and linked to the object of the contract.
The suspension of public sector contracts under these measures shall not under any circumstances constitute grounds for their termination.
In the coming days some measures, such as the granting of guarantees or the new ICO Credit Lines, will be developed by the Council of Ministers and the ICO respectively, of which we will inform you in due course. If you have any doubts or queries regarding the measures adopted, please contact us at email@example.com.