President Sebastián Piñera has revealed the demanding framework of conditions set forth by the Government for managing the state-guarantee program that aims to facilitate access to working capital loans for companies.
The framework allows the state to guarantee new loans of up to US$24 billion and complements the US$3 billion capitalization of the FOGAPE Loan Guarantee Fund announced on Wednesday, April 9.
“The success of this plan hinges on active and expeditious participation by banks so that these Covid-19 lines of credit reach the companies that need them on a large scale and in an effective, timely manner,” said the President of Chile, Sebastián Piñera, who was accompanied by Treasury Minister Ignacio Briones.
These measures aim to provide access to working capital loans to 99% of Chilean companies so that they can overcome the economic impact of the spread of the coronavirus.
The framework has been coordinated with complementary actions by Chile’s Central Bank and the Financial Market Commission (CMF) and has already been communicated to the banking industry.
Treasury Minister Ignacio Briones added that “the tremendous effort the State is making in terms of guarantees will be for nothing if these guaranteed loans do not reach companies effectively, on a large scale and with preferential interest rates and terms.”
The following are the central elements of the framework established by the Government and communicated to the banking industry:
Covid-19 lines of credit for working capital in an amount equal to up to 3 months of sales in a normal period (October 2018-October 2019) for companies with annual sales of up to UF 1 million. This includes more than 99% of the companies in Chile.
The line of credit will have a 6 month grace period. It will be payable in installments with terms of between 24 and 48 months.
There will be a maximum rate for the loans (MPR+3%), which under current circumstances equals a real interest rate of about 0%.