Funding Options for New Businesses: ICO Loans & More
Funding Options for New Businesses
The Official Credit Institute (ICO) aims to support companies exceeding the critical period of their first two years. The characteristics of these loans are:
- Repayment terms: Three, five, or seven years.
- Interest rate: May be fixed or variable.
- Request: Made at the offices of major banks and savings institutions.
- Granting: Must respect the ceilings and are compatible with assistance received from autonomous communities.
Mutual Guarantee Schemes Refinancing (SGR)
Mutual Guarantee Schemes (SGR) are non-profit financial institutions that support SMEs to enable them to achieve the bank financing they need. Guarantees are only provided to members. The scope of these societies is often regional or sectorial. Refinancing companies offer coverage and adequate security for the risks incurred by the mutual guarantee societies.
Equity Financing
Equity-financing is a compromise between social capital and long-term loans. Although the company has to repay a loan, the payment terms are flexible, reducing enforceability to a minimum. In practice, it operates as if it were a contribution from the owners. This is a long-term loan with specific characteristics:
- Subordinated debt: Priority of payment over any other debt the company owes.
- Payment of interests: The interest rate payable depends on the business results of the beneficiary.
- Return: Extended periods without repayment of principal, especially at the beginning of the loan’s life.
Business Incubators
Business incubators focus on three key points: local rental offices at a greatly reduced price, common services that imply lower initial costs, and, most importantly, advice and customized training to help develop the business.
Public Aid for Businesses
Local Aid
Local aid, through municipal employment services, city councils, county or other local entities, generally promotes two lines of action.
Grants from Autonomous Communities
In general, the autonomous communities focus their efforts on three fronts:
- Social enterprise: Labor associations and cooperatives, as well as innovative ventures, tend to support specific lines.
- Disadvantaged groups: Women and youth are the main recipients of aid.
- Innovative Companies: Companies associated with new technologies are major creators of wealth today.
Statewide Aid
Statewide aid takes four forms:
- Subsidy by the establishment as a freelancer: The subsidy can reach up to €10,000.
- Financial grants: This subsidy reduces the interest on loans to finance investment in the creation and implementation of the company by up to 4 points, with a ceiling of €10,000.
- Grant for technical assistance: The amount of this subsidy will be up to 75% of the cost of services provided by external professionals, with a ceiling of €1,000.
- Training grants: The objective is the partial funding of courses related to management and business administration, and new information technologies and communication. The amount of this subsidy will be up to 75% of the cost of courses attended, with a ceiling of €3,000.
Requirements to Access Aid
The requirements to access any of this aid are:
- To be unemployed before the date of commencement of the activity and registered as a job seeker in the public employment services.
- For at least three years, maintain the business and be registered in social security, in the special regime of self-employed, tax debtors in the census and tax economic activities.
European Level Aid
European level aid aims to promote harmonious development throughout the European Union.
Structural Funds
Community support is aimed at reducing economic inequalities between the most disadvantaged regions of the European Union and promoting equality of opportunity between different social groups.