The state guarantees two new loans for companies
The state guarantees two new loans for companies
Small-sized enterprises (SMEs) and mid-sized companies will benefit from "participatory" loans distributed by commercial banks and 30% guaranteed by the State. They will be repayable in 8 eight years with a deferred amortization of 4 years. Subordinated bonds may also be issued. They will be reimbursed in one time after 8 years.
1. Equity loans Recovery
These loans are aimed at SMEs and mid-sized companies that achieved a turnover of at least 2 million euros in 2019.
They are repayable in 8 years with a deferred amortization of 4 years. "The amount can reach 12.5% of the 2019 turnover for an SME and 8.4% of the 2019 turnover for an ETI", says Bruno Le Maire. They will be distributed by commercial banks who will then transfer them, up to 90 %, to investment funds (see the diagram at the end of the article).
2. Subordinated bonds
The second funding tool announced is called government bonds Recovery. Also guaranteed by the State up to 30 %, these bonds are repayable in one go after 8 years. They are subordinated under the same conditions as the so-called participative loans. They are also aimed at SMEs and mid-sized companies but will be acquired by investment funds.
Availability until the end of June 2022
The Equity loans Recovery and subordinated bonds schemes are expected to be operational from April. The State guarantee will apply to eligible financing granted before 30 June 2022.
What will be the cost for borrowers?
"For an SME, the total pricing should be in the range of 4 to 5.5% for loans with a duration of eight years," predicts the Minister.
These two tools can be combined with the PGE (loan guaranteed by the State) with however a limit for borrowers who have used the entire PGE quota to which they are entitled, i.e. 25% of their turnover. In case of reaching of this limit, the eligible amount will be reduced to 10 % (instead of 12.5 %) for an SME and to 5 % (instead of 8.4 %) for an ETI, says Bruno Le Maire.
Definition of equity loans by the Banque de France
The participative loan is analyzed as " a means of intermediate financing between the long-term loan and the acquisition of equity”, states a note by the Banque de France. Initially, the repayment of the participative loan is conditional on the borrower's full repayment of all other bank’s loans (the debt is then called "subordinated"). It does not confer any voting rights on the borrower and is granted in return for a fixed interest rate, usually plus a share in the borrower's net profit. Because of these characteristics, it is generally presented as an equity product that helps to improve the financial structure of companies", summarizes the Banque de France.
THE FINANCING CIRCUIT OF PARTICIPATIVE LOANS RELAUNCH AND BONDS RELAUNCH
Source: Ministry of Economy, Finance and Recovery
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