The Covid-19 credits guaranteed by the Confederation were granted to companies under more flexible conditions than usual (easier bureaucracy and less strict conditions of granting, etc.). While it is true that these credits have been essential for many SMEs, the restrictions linked to them could, in the medium term, hinder the proper functioning of companies. Indeed, according to the new law (which came into force on 19 December 2020) on joint and several changes and novelties regarding the credit conditions are to be considered.
Firstly, the duration of Covid-19 credits is extended from 5 to 8 years. Secondly, the deadline for the start of the credit repayment is postponed by one year and consequently the first payment will only be made on 31 March 2022 to give companies more time to recover from the crisis. In addition, the investments necessary for the operation of the companies are once again authorized using the funds granted by Covid-19.
In contrast to the above paragraph
which mentions changes that can be perceived rather positively by the managers of companies that have granted a Covid-19 credit, this one will reflect more the other side of the coin. It is important to note that if the Covid-19 credit is not fully repaid, companies are prohibited from distributing dividends, directors’ fees or repaying loans to shareholders. This prohibition has attracted a lot of criticism from the business sector as it is very restrictive as dividends are a way to attract investors.
Moreover, if the company does not comply with the above-mentioned restrictions, the guarantee can be requested from the management. As the Covid-19 loan is guaranteed by the Confederation, the company or its directors do not need to pledge any assets (buildings, land, machinery, etc.).
But then what actions should be taken for these companies when the future is very uncertain due to this health crisis that is constantly being prolonged?
As the situation is very complex, there is obviously no miracle solution, but one could be the granting of a new credit. In fact, with a new loan, companies could first repay the Covid-19 loan and thus regain the room for maneuver restricted by the conditions of the Covid-19 loan. In a second phase, it is possible that these companies will be granted a higher amount than the Covid-19 loan and will therefore be able to continue their development and achieve their objectives.
As each company has different circumstances and needs, PrestaFlex Services, a company active in the SME credit advisory market, will help your company to find the best possible solution to deal with the COVID 19 credit, just reach out to our skilled experts for tailor-made financing recommendation.