The President of Costa Rica signed, this Wednesday, the “Law for the creation of the National Guarantee Fund for the support of companies affected by COVID-19 and the economic recovery”, which allows the creation of loan guarantees to give credit to people and companies economically affected by the COVID-19 pandemic
The guarantee fund is a financial instrument through which the State allocates an amount which will be a guaranteed to all those companies that, affected by the pandemic, find it difficult to get access to loans from banks and other financial entities. This fund will improve the conditions, terms and interest rates for companies trying to overcome the impact generated by the pandemic.
With these news loans, we allow an opportunity to generate employment, economic activity and recovery for Costa Ricans. These loans are available, through the financial sector, which helps companies to have real options to credit. It is an opportunity, and like all opportunities, we must take advantage of it,” said President Carlos Alvarado.
Over 3 years, the Guarantee Fund will receive a $270 million loan from the Central American Bank for Economic Integration (CABEI), which will be used to support bank loans granted by banks to individuals and companies affected by the pandemic.
By doing this, the State will grant bank loans of up to 75% of the principal amount of the credit given by the different banking institutions to the thousands of companies affected by the pandemic. These guarantees would go into affect in the event of non-payment by the borrower
The 75% guarantee means that if a company gets a loan of 4 million colones, but fails to pay it back, the Guarantee Fund will cover 3 million colones to the lending institution that provided the loan. This translates to a lower credit risk for the lending institution.
The new law will give priority to micro, small and medium-sized companies, since 50% of the resources must be directed to companies with 100 employees or less.
Potential beneficiaries of this guarantee fund must have a good credit record prior to the health crisis, not be more than 60 days in arrears, document the impact of the pandemic, and maintain workers at the time of application.