The French state-guaranteed loans at a glance
On March 2020, the French State announced an exceptional package of €300Bn state-guaranteed loans (“PGE”) to support SMEs during the Covid-19 crisis.
Since the launch of the first state-guaranteed loan on the October platform in June 2020, 164 French state-guaranteed loans were funded by institutional and retail lenders for a total amount of €21M and around €600,000 have already been repaid to the lender community (including capital and interest). New loans will be granted in the coming months, following the government announcement to extend the guarantee program for the second time, until June 2022.
In December 2020, a first change was announced regarding the repayment scheme of these loans. Businesses could request their creditors to grant them an additional one-year deferral to start repaying their state-guaranteed loan.
In January 2022, the French government announced a new set of measures to support very small companies still in difficulty. Very small companies will now be allowed to spread out the repayments of their loans across 10 years, as opposed to 6 years, and push back their first capital payment for another 6 months.
The current repayment scheme
State-guaranteed loans are different from the standard loans published on October. The characteristics of these loans (duration, interest rate) have been set by the French government.
French state-guaranteed loans are initially 12-month deferred loans with payment of interest (2%) and principal at the end of the loan.
However, what makes the state-guaranteed loan unique is that the borrower can decide to extend their loan after the first 12 months, with a higher interest rate. So far, at the end of this period, the borrower has 4 options :
Regardless of the option chosen by the borrower, the loan remains covered by a 90% state guarantee.
An extended access to aid for very small enterprises
At the beginning of January 2022, the French Ministry of the Economy and Finance announced an extended access to aid businesses suffering from Covid restrictions and loss of revenue.
Very small companies, that were granted a state guaranteed loan of less than €50,000 and are facing serious financial difficulties, can now benefit from an extension of the repayment period for their loan, which passes from 6 to 10 years. They will also be able to request an additional 18-month deferral period (vs. 12 months for other companies) included in the extension period.
These companies will have to request the extension to the Banque de France’s Credit Mediation Service, which will facilitate the negotiation between the borrower and the creditor. October does not normally offer loans with maturity superior to 7 years, except when it is made mandatory by a Court decision. We are currently trying to reach out to the authorities to find the best solution for all the parties involved, including our community of retail lenders.
The interest rate applicable during the whole extension period is between 3.71% and 5.41% depending on the project rating (learn more).
If you lend to a loan covered by the French State, you have to consider that the company might request an extension of its loan over a period of time longer than 12 months and that your capital will be immobilised during the whole period. Not all companies can nor will request an extension, but you need to consider this possibility. The October team is at your disposal for any questions you may have relative to these guaranteed loans.