MADRID (Reuters) – The Spanish government’s direct aid to small and medium-sized companies, to be approved by the cabinet on Friday, will likely total 7 billion euros ($8.4 billion), up from a previously-proposed 5 billion, a government source told Reuters.
The total aid package worth 11 billion euros will also include 3 billion euros to be implemented through voluntary debt restructurings of state-backed loans granted by banks to companies hit by the COVID-19 pandemic, the source said on Thursday.
The remaining 1 billion euros will come in the form of capital injections.
Regional authorities will follow a set of national criteria to distribute the aid, which is to cover fixed costs like rent or supplies.
To qualify, companies must prove to Spain’s tax authority their revenue has fallen since the start of the pandemic.
Banks will determine which companies are eligible for the debt restructuring included in the programme.
So far, government support to companies has taken the form of a national furlough scheme and a package of 140 billion euros in loans from the ICO national credit agency, some 80% of which were guaranteed by the state.
The aim of those policies was to shore up liquidity as businesses struggled for cash during a year of lockdowns and other restrictions.
But economic institutions like the Bank of Spain have been calling for measures to strengthen solvency and stave of a potential wave of bankruptcies after many companies took on debt.
The aid package will also extend a moratorium on declaring bankruptcy to give companies in financial trouble time for the measures to take effect.
Government sources suggest the idea is to bridge the second quarter of the year until the European funds arrive, which Spain expects to start receiving at the beginning of July.
($1 = 0.8362 euros)
(Reporting by Belen Carreno; Editing by Nathan Allen and Andrei Khalip)