In this blog we want to help all those entrepreneurs who want to access an ICO loan but the bank has denied it.
It is always possible to get financing and, if the bank denies it, you have to resort to private financing . In this blog, in addition to explaining what an ICO loan is , we will briefly explain the advantages of alternative financing and, if you want to expand the information and see the trend in the financial market, you can visit our previous posts on:
To help all entrepreneurs, we will divide this blog into two sections:
- First of all, we are going to briefly explain all the information such as what is an ICO loan and how to request it if it has not been tried yet. Also, complementary information on the characteristics of the ICO COVID-19 .
- Second, we will report on how to obtain non-bank financing once the ICO loan is denied by the banks, a situation that currently occurs in a very high percentage of cases. If the bank has already denied access to credit, you can go directly to the section " What to do if an ICO loan is denied ".
What is an ICO loan?
Before applying for a loan, you first need information. To have all the necessary information, there is no better option than to access the official website of the Government of Spain of the Official Credit Institute (ICO) at www.ico.es and inform yourself correctly.
In addition, the institution itself has created a summary video to briefly inform what it is:
To make a quick summary, according to the official website of the Ministry of Economic Affairs and Digital Transformation, the ICO is a public bank with the legal form of a public business entity (EPE) .
This public bank has ICO Lines designed to promote business activity and finance business activities and investment projects for freelancers, entrepreneurs and companies, as well as an internationalization process.
According to its own website, these are the lines in which the ICO works to promote business activity:
- ICO line for companies and entrepreneurs
- ICO Commercial Credit Line
- ICO SGR Guarantee Line
- ICO International Line
- ICO Exporters Line
- ICO International Channel Line
How to request an ICO loan?
To request an ICO loan , it is as simple as going to a financial institution. We recommend the entity with which you usually work. Each entity has its own rules and risk policy, and it is the latter that decides on the concession since they are the ones who mediate and respond with between 20% and 40% of the amount in the event of non-payment. This is the main reason almost all ICO loans are denied .
Applying for it is a simple process but requires a lot of bureaucracy and, as we have said before, it is an almost impossible task that , with the current economic situation, banks grant ICO loans .
To go faster, we list the main requirements that are needed to access ICO loans:
- Inform, detail and justify with documentation why the financing is needed.
- Not appear on the list of defaulters.
- Have all debts paid.
- Justify monthly income.
- Positive profit and loss.
If any of these requirements are breached, the loan will automatically be denied. For this reason, in the next sections, we will explain how all the companies that need financing and, the banks deny them ICO credit, can obtain alternative financing to obtain liquidity for their businesses.
Due to the Coronavirus crisis , on March 24, 2020, a new route of ICO guarantees of 20,000 million and about 20,000 million more were approved on Friday, April 10 to help the economy.
This new channel of ICO guarantees has been created and exists to guarantee liquidity for all types of companies and freelancers of any size, activity sector or geographical location that have their registered office in Spain and whose activity is affected by the economic effects of the COVID-19 .
The deadline to request them is from April 6 to September 30, 2020 and the Government covers between 60 and 80% of the loan in case of default.
It is designed so that 50% go to the self-employed, micro-companies and SMEs and the remaining 50% to large companies.
The process is the same as with any other ICO loan :
- You have to go to the bank to apply for the ICO COVID-19 loan .
- Comply with the risk requirements stipulated by the bank.
This is the theory, but the reality is that currently the vast majority of companies are not having any facility to obtain an ICO COVID-19 loan and the banks are denying practically all of them .
If you have requested an ICO loan, the bank has denied it, and you are looking for alternative financing , you just have to fill out the form on the right and we will help you.
What to do if an ICO loan is denied?
As we have commented previously, although in many cases the operation is guaranteed by 80% by the State, the Spanish banks are denying ICO loans to the self-employed and SMEs because the banks do not want to take responsibility for the remaining percentage.
There are many reasons why traditional banks do not grant ICO credits , but the main reasons why access to credit is denied are:
- Be in default as of December 31, 2019
- Be subject to bankruptcy proceedings as of December 31, 2019
- They have been developing their activity for less than 3 years
- That they have had accounting losses
- Being in a crisis situation according to the bank's risk parameters
If you are in any of these cases, such as being included in a delinquency record such as Financial Credit Institutions, you don't even need to ask the bank and it is better to spend the time looking for alternative financing .
In short, if you cannot get an ICO loan for whatever reason, you can get financing through private financing or private equity.
Alternatives to the ICO loan
As we have commented at the beginning of this blog, if you cannot access an ICO loan and you need financing urgently , there are different alternatives to get it.
It should be noted that ICO loans also have their disadvantages , which do not occur with alternative financing, such as:
- Excessive paperwork
- Processing only through banks
- Very high quantities to request
- Discarded for individuals
- Very long return times
The most widely used alternative financing is private financing or private equity. Private financing has many advantages over traditional financing and it has been used for many years and is regulated by the Bank of Spain (increasingly).
Proof of this is Dark Keep , which has been a leader in the sector for more than 15 years and is registered with the Bank of Spain, in the real estate lender registry .
The lenders sector , traditionally, did not have a very good reputation, so it is very important that, whenever you want to resort to this alternative financing, you ask for the appropriate documentation as you are registered with the Bank of Spain .
On many occasions, there is also the possibility that it is the client who is not interested in an ICO loan because, as we have said before, not everything is an advantage or the requirements are not met. For example, if you want quick financing, it is not the ideal loan.
With the ICO loan we are talking about a type of credit that requires a lot of bureaucracy and that can take a long time to finally get the necessary money.
When financing is needed, it is always good to weigh all the options .