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With the regulations published in the Official Gazette, it only remains for the CMF to issue regulations on the treatment of provisions for banks to start operating through this mechanism, which would be during the first week of May.
The project that strengthens the Fund with Guarantees for Small Entrepreneurs (Fogape) is already law and it only remains that this week the Commission for the Financial Market (CMF) will issue instructions on the treatment of provisions to banks. With this, these Covid-19 lines could be delivered during the first week of May.
The measure considers an expansion of state guarantees by up to US $ 3,000 million, allowing the granting of state-guaranteed loans for about US $ 24,000 million, which represents almost 10% of Gross Domestic Product (GDP). In this way, SMEs will be able to access loans with special conditions to face the crisis.
Which companies will be able to take advantage of this measure?
Companies with annual sales of up to UF 1 million are eligible. They will not be able to access micro and small companies that have been in default in the banking system for more than 30 days as of October 31, 2019.
Nor will medium and large companies that have been in default in the banking system greater than 30 days as of March 31 of this year be eligible. Of course, both restrictions will not apply if these companies regularized their situation when ordering the Covid-19 line.
The credit may not be granted to companies that are in bankruptcy proceedings to reorganize or settle liabilities and assets. Neither to firms that are individually classified as risk to the portfolios of their respective creditors, when they are classified as impaired.
What is the interest rate on the Covid-19 credit?
The annual and nominal interest rate of the loan may not, in any case, exceed the current Central Bank monetary policy rate (0.5%), at the time the financing is granted, plus 300 basis points (3% annual nominal) .
How much do state guarantees cover?
The coverage of state guarantees depends on the sales sections in which SMEs are:
| SALES PER YEAR | STATE GUARANTEE COVERAGE |
| LESS THAN UF 25,000 | 85% OF THE WORKING CAPITAL LOAN up to UF 6,250 |
| BETWEEN UF 25,000 AND UF 100,000 | 80% OF THE WORKING CAPITAL LOAN up to UF 25,000 |
| BETWEEN UF 100,000 AND UF 600,000 | 70% OF THE WORKING CAPITAL LOAN up to UF 150,000 |
| BETWEEN UF 600,000 AND UF 1 MILLION | 60% OF THE WORKING CAPITAL LOAN up to UF 250,000 |
What institutions participate?
Banks, including their subsidiaries, and the credit unions referred to in the first paragraph of article 87 of the General Law of Cooperatives may attend.
Are there financing limits for companies that access this line?
Yes and they are detailed in the following table:
| Companies with annual net VAT sales up to | Maximum financing limit |
| UF 1,000 | uf 250 |
| UF 10,000 | UF 2,500 |
| UF 25,000 | UF 6,250 |
| UF 100,000 | UF 25,000 |
| UF 200,000 | UF 50,000 |
| UF 400,000 | UF 100,000 |
| UF 600,000 | UF 150,000 |
| UF 1,000,000 | UF 250,000 |
What will be the financing term?
The term of the credits granted will be between 24 and 48 months, including at least six months grace period for the payment of the first installment, which must be equal and successive, without prejudice to the possibility of granting intermediate flexibilities. that are for the benefit of the debtor.
What happens if there is a previous debt with the institution with which a credit of the Covid-19 line is signed?
The regulation of the law states that the financial institution granting the financing with the Covid-19 guarantee must reprogram the commercial credits in force in installments, which the applicant company maintains with it when granting the new financing through Fogape. Said reprogramming must consider a postponement of any capital amortization that ends in the six months following the moment of granting the new financing. That yes, the institutions will be able to continue receiving the interests of the previous responsibilities.
What should the resources granted through the Covid-19 line of credit be used for?
The credit may only be used to cover the company’s working capital expenses, including the payment of remunerations and social security obligations, leases, supplies and invoices pending settlement, tax obligations, guarantee vouchers, insurance expenses, expenses associated with granting of lines, and any other expense that is essential for the operation of the firm.
How will it be verified that the resources granted are for working capital?
According to the law, the participating financial institutions must establish the procedures that are necessary to verify that these resources are used to finance working capital.
For this, the regulation indicates, it will suffice with the sworn declaration of the debtors, which establishes the destination to give to the borrowed resources. Said statement must be submitted by the financial institution to Fogape when requesting the payment of the state guarantee.
To read the complete regulation of the Law that strengthens Fogape, enter here.
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