More Next Generation: an additional 22.5 billion in financing for companies through ICO credit lines

Spanish Government approved the extension of the Recovery Plan this week. The European Next Generation programme will support 84,000 loans included in this addendum, as well as 7.7 billion in transfers and 2.2 billion from the REPowerEU mechanism. Among the programmes to which these resources will be allocated is the Official Credit Institute (ICO), which will mobilise 4 billion in relation to the promotion of social rental housing and whose loans will be subject to an interest rate of 4%.

Vice-president Nadia Calviño announced that the ICO and other banking institutions will have 22.5 billion to deploy lines of financing to entrepreneurs, companies, green projects and especially in the tourism sector. The loans will create funds to finance technology start-ups and the Spanish audiovisual sector. These loans will also reinforce the structural funds, creating a security cushion of 3 billion “to give credibility to entrepreneurs and employees in the event of an economic setback” according to the Ministry of Economy.

In addition, the regional governments will receive funds for sustainable investment from the European Investment Bank (EIB). The EIB will be responsible for distributing these funds according to the financial viability of the plans submitted by the regional governments to obtain financing.

The extension of the Recovery Plan will also mobilise 28.3 billion to reinforce 12 Perte projects, including the Chip and ERHA Perte – aimed at deploying renewable energy – and the Water Cycle Digitalisation Perte. It is expected to include 18 reforms that will complement the existing ones in terms of energy and correction of the distortion in the supply-demand ratio of the labour market.

Undoubtedly, good news for Spanish companies that have new financing instruments. At Altria Corpo we advise on these and other financial solutions, both banking and alternative.

Medium-sized enterprises, as necessary as they are scarce

The Spanish economy is based on SMEs. Not only do they represent 99.8% of the total number of companies, but also 62% of Gross Value Added (GVA) and 66% of total business employment. However, one of the drawbacks for economic growth in our country is the low percentage of medium-sized companies and an excessive concentration of companies that are too small in size.

In Spain, there are fewer than 20,000 medium-sized companies, considering in this segment those with between 51 and 250 employees. If we add as a criterion those with a turnover of more than 50 million euros, the figure drops to only 3,300, and if we exclude those that are not foreign subsidiaries, the total does not exceed 1,800.

There is a direct relationship between the size of companies and the development of a country’s economy, since an increase in volume favours investment in innovation and therefore productivity, which impacts, among other aspects, on better jobs and real wages. Larger size also correlates with higher survival rates in times of economic crisis. In terms of financing, size undoubtedly also matters, since, in addition to better risk assessment by traditional banks, there is also greater availability of alternative financing, with many financial providers dedicated to this segment. Thus, we can count on direct lending funds for these medium-sized companies with the possibility of loans from one million euros and great flexibility in their repayment, and a wide variety of possibilities depending on the need, economic sector and guarantees provided. Having a financial advisor such as Altria Corpo will help to obtain the best alternative according to each circumstance.