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The Ministry of Finance entered with immediate discussion in the Chamber of Deputies a bill that modifies the Fogape Law, with the aim of expanding the benefits and uses of the Guarantee Fund for Small and Medium-sized Entrepreneurs (Fogape) and help companies to overcome the pandemic and reactivate through state-guaranteed credits, which can now be used for investment and payment of current debts, in addition to working capital.
With regard to the current Fogape-Covid credits, the project allows the debtor and its creditor to agree to extend their term up to 5 years (Currently the maximum term allowed is 4 years).
Further, a new Fogape-Reactiva program is created to expand access to state-guaranteed credit and extend its term until 2028.
This new line makes the rate more flexible to allow more companies and sectors to access loans with a state guarantee.
Along with this, the credits from the Fogape-Reactiva program may be used to finance investment, refinance Fogape credits, as well as working capital.
“We must promote the recovery of activity, investment and employment, as well as alleviate the financial burden faced by companies, so that they can reactivate,” said the Minister of Finance, Ignacio Briones.
To date there are more than 400 thousand applications for Fogape-Covid credits and almost 300 thousand credits approved for around US $ 14,000 million.
These figures compare very favorably with the use of the Fogape program in previous crises such as the subprime in 2009-2010, when the program financed 75,000 companies and granted total loans of around US $ 2.4 billion.
With this project, which modifies the Fogape Law, the Government expands the battery of instruments so that more companies can overcome the crisis and reactivate.
The amendments to the Fogape Law presented are:
-It is allowed to extend up to 5 years the guarantee of the Fogape-Covid credits (currently the maximum term allowed is 4 years), in such a way that, with an agreement between the debtor and the financial institution, the payment term of the current credits in one year.
-The credits granted under the new Fogape-Reactiva program are authorized to be used to pay current debt, such as the Fogape-Covid credits.
-Credits granted under the new Fogape-Reactiva program are allowed to be granted until December 31, 2021 (currently the term for the Fogape-Covid program is April 30, 2021), so that companies With annual net sales that do not exceed 1,000,000 UF, they can request financing with Fogape-Reactiva guarantees.
-Without prejudice to the fact that the maximum rate of 3% + Monetary Policy Rate remains in force (currently at 0.5%), for any company that wants to access the Fogape-Covid program, the rate for financing granted under other programs is made more flexible Fogape. This allows, under the new Fogape-Reactiva program, companies belonging to riskier sectors to access credits guaranteed by Fogape.
-The new Fogape-Reactiva program allows you to increase the limits of Fogape guarantees in the following cases:
a) For economic sectors that have been most affected by the current crisis, such as tourism, hotels and gastronomy.
b) When the credit is used for the acquisition of fixed assets.
-Finally, the new guarantees that are delivered under the Fogape-Reactiva program are allowed to have a maximum duration of 7 years from their granting, extending the program until 2028.
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