How ICO loans work
Financing for self-employed and companies with a competitive interest and a term of up to 20 years
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The functioning of ICO loans does not differ too much from the ‘traditional’ loans granted by banks. However, unlike these, this form of financing involves three parts: the Official Credit Institute, the credit institution and the applicant, which can be an SME, self-employed or even a public body.
On the one hand, it is the ICO that lends the money and sets the conditions to access it; meanwhile, the credit institution analyzes the viability of the loan, manages the borrowed money and assumes the risk in case of default of the client. Thus, as in any other loan, it is the recipient of the money that has to return it within the stipulated time frame, together with the associated interest.
It is, in short, a mediation system for SMEs and self-employed people to access a series of financing lines, each with its own characteristics. Currently there are five of these lines:
- ICO Companies and Entrepreneurs : mainly aimed at self-employed workers and companies that need liquidity or want to make productive investments within Spanish territory. This line also includes financing for public bodies and for communities of owners.
- ICO Guarantees SGR / SAECA : a line aimed at freelancers, companies and public or private entities that have the endorsement of a Reciprocal Guarantee Company or of the State Corporation of Agricultural Insurance.
- ICO Commercial Credit : designed for freelancers and companies that need access to liquidity through the advance payment of bills that are pending collection.
- ICO Exporters : focused on self-employed and companies that need access to liquidity through the advance payment of invoices from export activities or to finance the previous production costs of their goods or services destined for the foreign market.
- ICO International : has two tranches, one for self-employed, companies and public or private entities that need investment or liquidity; another for Spanish or foreign companies that want to finance the purchase / sale of goods or services.
These financing tools are intended to encourage the creation of companies for their development both within Spain and abroad. Thus, some examples of fundable concepts contemplated by the ICO are:
- The acquisition of cars whose cost does not exceed € 30,000.
- Facilitate up to 100% liquidity for current expenses.
- Anticipate the payment of bills due at no more than 180 days.
- Acquisition of companies.
- Creation of companies abroad.
- To cover costs of production and elaboration of goods or services to export.
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Financing limits and conditions of ICO loans
The maximum financing that can be chosen and its refund conditions vary depending on the chosen line. As a general rule, the maximum capital granted by the ICO amounts to € 12.5 million and has a maximum repayment period of 20 years. However, most of the loans that are granted do not exceed € 25,000 and are destined for SME and micro-SME projects.
As for the interest associated with the loan, it may have a fixed rate, with a biweekly, or variable rate: comprising a 6-month Euribor plus a spread.
- In one-year loans will add up to 2.3%.
- In loans of two to three years a 4% is added.
- In loans of 4 years and up , 4.3% is added.
ICO loans do not have opening or study fees, but a cancellation fee in case of early repayment.
This amortization can be from 1 to 10 years, 12, 15 or 20 with up to 2 years of grace if investment or investment and liquidity are financed. And from 1 to 4 years with up to 1 deficiency if only liquidity is financed.
How to apply for an ICO loan
To apply for an ICO loan, the interested party must go to one of the offices of the credit entities associated with this financing system, among which is BBVA, and present a proposal that should focus, mainly, on these two keys:
- Who requests the financing and why do you need it?
- Payment capacity, asset solvency and additional guarantees, among which is the guarantor. This, like in any other money application, is one of the most important parts in order to get financing.