State-guaranteed loan (SGL)
In the context of the health and economic crisis linked to Covid-19, the Government has implemented an exceptional system of guarantees intended to support bank financing for companies, to the tune of 300 billion euros.
What is the State-guaranteed loan
The State-guaranteed loan is a cash advance, repayable after 12 months. At the end of the first year, the company may decide to amortise the loan over a further 1, 2, 3, 4 or 5 years. The loan is backed by a State guarantee of 70 to 90%, depending on the company’s size. As such, the banks retain a share of the associated risk.
This loan may represent up to 3 months of 2019 turnover, or 2 years of payroll for innovative companies or companies created since 1 January 2019.
The banks have undertaken to consider all requests submitted to them, and to provide a prompt response. The objective is the widespread distribution of State-guaranteed loans at cost price in order to promptly alleviate the cash flow of companies and professionals. The cost of the SGL is 0.25% or 0.50% of the borrowed amount, and will be payable after 12 months.
However, all companies that are not meeting their obligations in terms of payment deadlines will not have access to this State guarantee for their bank loans.
Moreover, French banks have undertaken to defer the repayment of existing corporate loans for up to six months, at no cost.
Who is eligible for the State-guaranteed loans?
Until 31 December 2020, companies of any size and legal form can apply to their regular bank for a State-guaranteed loan in order to support their cash flow.
A decree of 6 May 2020 from the Ministry of the Economy and Finance broadened the scope of beneficiaries of this scheme. Henceforth, certain property investment companies, companies in difficulty since 1 January 2020, and “Young Innovative Companies” can have access to it.
The SGL also covers loans granted through crowd-funding platforms.
Steps for obtaining a State-guaranteed loan
• For companies with fewer than 5,000 employees and a turnover in France below 1.5 billion euros:
o The company must contact one or more banking partners to apply for a loan:
It is possible for one request to include several loans. The cumulative amount of these loans must not exceed 25% of turnover or 2 years of payroll for start-ups or innovative companies.
o After examining the company’s situation, the bank gives a pre-approval for a loan.
o The company connects to the attestation-pge.bpifrance.fr platform to obtain a unique identifier that it provides to its bank.
o Upon confirmation of the unique number by Bpifrance, the bank grants the loan.
• For companies with more than 5,000 employees or a turnover in France above 1.5 billion euros:
o The company must contact its banking partners to apply for a loan, and to obtain their pre-approval.
o The company sends its request to the address: firstname.lastname@example.org.
o The State guarantee is granted by individual order of the Minister of the Economy and Finance. The banks can then provide the company with the loan.
A few figures
As of 12 June, the banks had granted €101 billion of loans out of the €113.4 billion of applications received by them. The refusal rate of eligible applications is only 2.6%.
Very small enterprises (VSEs), with fewer than 10 employees and a balance sheet and turnover below €2 million, and small and medium-sized enterprises (SMEs) with fewer than 250 employees and a turnover below €50 million, account for 94% of the beneficiaries, i.e. almost 500,000 enterprises.
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