January 28, 2021

UPDATED – COVID-19 | France: State Guarantee Scheme for New Money Loans





Created 1 April 2020 – Updated 10 April and 19 May 2020 - Last update 28 January 2021

In light of the growing pandemic of COVID-19, the French government has made a number of unprecedented decisions in order to support business activities. Among an extensive panoply of measures relating to short-time work, tax relief, capital markets and other areas, the French Government has introduced a EUR 300 billion State guarantee scheme (the “Scheme”) for new money loans to be granted to French entities by financial institutions and crowd-funding intermediaries.

The conditions and eligibility criteria to benefit from the Scheme have been defined in a law of 23 March 2020, amending the 2020 finance act (law n°.2020-289 of 23 March 2020), as amended on 25 April 2020, and in a decree of the French Economy and Finance Minister (arrêté du 23 mars 2020, JORF n° 0072 du 24 mars 2020), itself as amended on 17 April, 2 May, 6 May, 26 May, 13 July, 15 September and 29 December 2020 (the “Decree”).

Below are the main features of the Scheme:

Eligibility Criteria Relating to the Borrower

  • Legal entities as well as natural persons, associations or foundations having an economic activity and duly registered with a French trade and companies register (i.e., able to provide the related SIRENE identification number) are eligible for the Scheme. However, indirectly, after the funds have been made available to an eligible French borrower, those funds could flow within the group and therefore benefit foreign entities. That being said, the loan agreement may contain clauses restricting such flow, and it is expected that the funds be used by the borrower to protect its operations and employment in France.
  • The following entities are excluded from the scope of the Scheme:
    • civil real estate companies (sociétés civiles immobilières), except for:
      • construction-sale civil real estate companies (sociétés civiles immobilières de construction-vente),
      • civil real estate companies whose assets are mainly composed of classified or registered historical monuments and which collect revenue related to the reception of the public and
      • civil real estate companies whose capital is at least 95 percent owned by collective real estate investment undertakings (organismes de placement collectif immobilier), by civil real estate investment companies (sociétés civiles de placement immobilier), by collective real estate investment professional undertakings (organismes professionnels de placement collectif immobilier) or by listed real estate investment companies (sociétés d’investissement immobilier cotées),
      • credit institutions and financing companies (établissements de credit and sociétés de financement) and
      • distressed companies which, on 31 December 2019, were already subject to liquidation, rehabilitation or safeguard proceedings; unless such companies were, in the cases of rehabilitation and safeguard, in the process of implementing a restructuring plan sanctioned by the court.

Eligibility Criteria Relating to the Lender

  • Eligible loans must be granted by credit institutions (établissements de crédit), financing companies (sociétés de financement) or eligible lenders acting through crowdfunding intermediaries (intermédiaires en financement participatif) as mentioned in Article L. 548-1 of the French Monetary and Financial Code. They may be granted under the form of bilateral, syndicated or “club deal” loans. The interest rate charged with respect to the loans will be equal to the refinancing cost of the relevant lender (no margin shall be applicable), but a State guarantee fee shall be applicable (see below).
  • French lenders as well as foreign lenders (subject to French banking monopoly rules) may benefit from the State guarantee, e.g., EU banking institutions lending into France on the basis of their “passport” should be eligible.
  • The State guarantee, which is irrevocable, is available to the credit institutions, financing companies or crowd-funding lenders that are granting the loans. It cannot benefit other entities. In the event where a qualifying loan would be transferred, in whole or in part, directly or indirectly, to a third party, the State guarantee would terminate, in proportion to the amount of the transferred participation, unless such transfer is made to an affiliate within the same banking group. However, a qualifying loan may be subject to risk or treasury sub-participation without termination of the State guarantee.
  • In the event of a transfer of the loan by the borrower as a result of a merger (fusion), demerger (scission), spinoff (apport partiel d’actifs), or other similar corporate restructurings, the State guarantee is maintained.
  • Credits under the form of bonds (obligations) are not eligible to the Scheme.

Eligibility Criteria Relating to the Loan

Granting Period:

The Scheme is only available for loans granted between 16 March 2020 and 30 June 2021.

Security Package:

Eligible loans must not be secured nor guaranteed by any other security interests or guarantees. However, for larger companies for which the State guarantee will only apply up to 70 percent or 80 percent of the loan amount (see below), the remaining 30 percent or 20 percent can be secured.

Maximum Amount per Borrower:

The maximum amount that can be made available to a borrower (in one or several loans, from one or several banks) under the Scheme cannot exceed the following caps:

  • General Cases:
    • for legal entities created before 1 January 2019, 25 percent of the 2019 total revenue of the borrower, if known, or of the total revenue of the borrower’s last available financial year; or
    • for legal entities created after 1 January 2019, the estimated amount of the total payroll (for France) for the first two years of operation, or, if more favorable, 25 percent of the 2019 (or, last available financial year) total revenue.
  • Main Specific Cases:
    • Innovative companies (i.e., within the meaning of Article 44 sexies-0 A of the French General Tax Code or meeting at least one of the criteria set in paragraph II of Article D. 313-45-1 of the French Code for the Entry and Residence of Foreigners and Right of Asylum): up to twice the total payroll (for France) amount for 2019, if such a cap is more favorable to the company than the general cap mentioned above;
    • companies operating within the hospitality, restaurant, transport, cultural and sports business sectors: the best three months of 2019 revenues or the last available year prior to 2019, as the case may be; and
    • suppliers to the aircraft industry: the value of two years’ worth of inventory, defined as the higher of two years’ worth of the 2019 inventory or twice the average of the 2018 and 2019 inventories.

Repayment and Amortization:

Eligible loans must:

  • include no principal repayment for at least one year and no more than two years (i.e., for a maximum of 24 months, only payment of interest shall be made by the borrower); and
  • include a contractual clause providing the borrower with the option to decide, at the end of the first year, (i) to repay the loan immediately, (ii) to amortize the loan over an additional period of one, two, three, four or five years or (iii) to repay part of the loan and amortize the remaining portion over several years (maximum of five years). The borrower can also decide to add an additional year without principal repayment, it being specified that the overall duration of the loan may not exceed six years.

Increase in Lender’s Commitments:

Eligible loans must lead to an increase in the lender’s commitment, as compared to its commitment toward the borrower existing as at 16 March 2020 (i.e., a euro-for-euro refinancing only to benefit from the State guarantee should not be eligible under the Scheme).

State Guarantee Features

  • The State guarantee cannot be enforced by the lenders if a “credit event” occurs within the first two months of the loan disbursement. A “credit event” is defined as (i) a payment default, (ii) the restructuring of the loan or (iii) the opening of any kind of insolvency proceedings in France or abroad.
  • The State guarantee covers outstanding principal, interest and accessories (including the guarantee fees), but only up to:
    • 90 percent for companies with fewer than 5,000 employees and total revenue of less than EUR 1.5 billion in the last financial year;
    • 80 percent for companies with total revenue exceeding EUR 1.5 billion but lower than EUR 5 billion in the last financial year; and
    • 70 percent for other companies.
  • A guarantee fee, ranging from 25 basis points to 200 basis points per year depending upon the size of the borrower as well as the maturity of the loan, shall be payable to the State by the borrower. While the State guarantee is a “final loss” guarantee, in the event of a payment default by the borrower, lenders are entitled to request and obtain from Bpifrance Financement SA, acting on behalf of the State, within 90 days from such request, a provisional payment based upon an estimate of the lenders’ likely loss, which payment shall be adjusted, upward or downward, once the final loss amount is ascertained.
  • A call under the guarantee must occur no later than three months after the date of expiry of the loan contract.

Governance of the Scheme

Bpifrance Financement SA, a public bank, is vested with the administration of the Scheme on behalf of the State. As such, Bpifrance Financement SA’s tasks will include (i) monitoring the outstanding guaranteed amounts for each loan granted under the Scheme, (ii) collecting the guarantee fees and repaying the same to the State, (iii) verifying that the conditions set out in the Decree are met, in the event of a call under the guarantee, and (iv) paying under the guarantee.

Steps for the Granting of the Loan

Steps with Respect to Entities with Fewer Than 5,000 Employees and Total Revenue Below EUR 1.5 billion:

After obtaining its bank(s) pre-approval for the granting of a loan meeting all the eligibility conditions of the Scheme, the borrower must obtain a username certificate from Bpifrance Financement SA by filling in the information requested on the following website: https://attestation-pge.bpifrance.fr/description.

The borrower shall, in turn, provide that username certificate to the relevant lenders before they can finalize the financing and make the funds available to the borrower.

In cases where Bpifrance Financement SA is notified that several loans are to be granted to the same borrower, the State guarantee will be acquired in the chronological order in which these loans are granted, provided that their cumulative amount remains below the applicable cap.

Steps for Larger Companies:

For companies with more than 5,000 employees or total revenue exceeding EUR 1.5 billion for their last financial year, and otherwise meeting the eligibility criteria to benefit from the Scheme, the application for the State guarantee will be reviewed by the French Treasury and granted by a specific decision of the Ministry of Economy and Finance.

Further clarifications regarding the Scheme eligibility criteria should be available in the coming weeks and we will update this memorandum as necessary.