October, a leading European online lender, confirms that State guaranteed loans were recently introduced in France by the nation’s government in order to help businesses during the COVID-19 pandemic, as they might be struggling to maintain operations.
October explains that the French government aims to make it “less risky” for lenders to finance SME initiatives by agreeing to cover a percentage of the loss in case of a default. This should ensure that there’s enough liquidity being offered to SMEs.
The European marketplace lender notes:
“October can distribute French State Guaranteed loans. The State Guaranteed loans are different from our standard loans. The French government has imposed a number of requirements and limitations to the conditions of the loan, before granting the guarantee.”
October explains that all State guaranteed loans in France are, at first, 12-month loans with “one capital repayment and one payment of 2% interest at the end of the loan.” But what makes the State guaranteed loan different from others is that the borrower has the option to extend the loan after the first year or 12 months and “spread the repayment over 1 to 5 years.”
The borrower also has the option to fully repay their outstanding loan. If they do this, then the lender will get the capital they had loaned, along with 2% interest paid to their October account “at the end of the 12th month.”
Another scenario is when the borrower pays 2% interest during the course of the first 12 months, however, they don’t repay any capital. In this case, the loan gets paid back over the course of “1 to 5 years, through monthly annuity payments.” The October team confirms that this period is “at the discretion of the borrower,” and that in this case, they will inform clients about the new duration and rate. October also mentions that the “90% state guarantee will still apply.”
(Note: for more details on loan terms and conditions, check here.)
The October team states:
“With a State guaranteed loan you can help companies get through the coronavirus crisis, while at the same time achieving a return on your investment. The size of that return is dependent on whether the loan will be extended and the duration of the extension. October can distribute State Guaranteed loans till the end of this year, when the guarantee ends.”
In June 2020, October added a new predictive risk tool to the platform to facilitate instant loans. In March 2020, investors of October approved a 3-month freeze on loan capital repayments, following the COVID-19 outbreak.