Many people have difficulty securing bank loans to start up their businesses. Although the Spanish banking system has improved dramatically in the last 15 years, when it comes to lending, banks aren’t generally great risk-takers.
They’re particularly cautious about lending to foreigners, even those who are resident in Spain and have some collateral, such as a house. Even fairly senior banking staff doesn’t have the autonomy to approve loans in the same way as they do, for example, in France. They often require a guarantor for the loan or ask for evidence that the business has been making some money, which isn’t usually realistic when you’re at the start-up stage! In theory, under EU regulations, both residents and non-residents should be equally eligible for a loan in any currency, but in practice you may find that you come up against closed doors.
If you need a bank loan, you must prepare a thorough and realistic business plan, which should include how you plan to repay the loan if it’s granted. Professional advisers who have offices in the UK and Spain, such as John Howell and Co., solicitors and international lawyers, The Old Glass Works (www.europelaw.com ), will work through your business plan with you and help you to present it in a form acceptable to a Spanish bank.
If you secure a loan, you will be expected to put in at least an equal amount of investment and the repayment period is usually between five and seven years. Rates vary considerably with the bank, the amount and the loan period, so it’s advisable to shop around with the help of your professional adviser.
Small and medium-size businesses
Small and medium-size businesses ( PYME) are entitled to preferential access to credit facilities offered by Spain’s state owned financial agency ( Instituto de Crédito Oficial/ICO), which is part of the Ministry of the Economy and Finance. For example, they can obtain a loan of up to 70 per cent of the net investment and, provided you have no other loan or grant, you can apply for the Micro-Credit Facility, which provides up to 95 per cent of the net investment (up to a maximum of around €25,000). The ICO’s website (www.ico.es ) is available in English and provides details of the loans available.
This article is an extract from Making a Living in Spain. Click here to get a copy now.