Direct Government Finance for Small Businesses


The Spanish Government has enabled its ICO (Instituto de Crédito Oficial) to grant loans of up to 200.000 € directly to small businesses, bypassing the high street banks. The question is will a Government department do any better at providing financial help to small businesses than a typical bank? We shall see…

The Royal Decree-Law 6/2010 includes a number of measures to stimulate the recovery of the Spanish economy and employment.

Amongst these measures Government has decided that the ICO (Instituto de Crédito Oficial – the State’s own credit organisation) should grant loans directly to small businesses, completely bypassing banking institutions.

This measure was introduced in response to the complaints made by businesses, which have highlighted the difficulty in raising finance from banks to support their activities. The banks have had access to ICO funds for several years but have been incorporating additional and unjustified conditions in their offers to customers. A perfect example of this is banks placing a condition on a loan like insisting that the customer changes to the bank’s own insurance company.

The new direct ICO credit facility, which will be available until the end of 2011, will have a limit of 200.000 € per business. The ICO will take on the overall risk of the lending subject to the borrower providing such guarantees as may be required by the ICO. Having approved the lending operation, the loan will be routed via a Spanish normal bank that will act solely as a conduit between the borrower and the ICO.

Bearing in mind the usual functioning of the Spanish Government bureaucracy, one only can only hope and try to be optimistic that this laudable initiative actually works.

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