Brussels, 14/11/2013 (Agence Europe) - Bank financing conditions have worsened in 2013 as regards interest rates, collateral and required guarantees. The European Commission is looking to the COSME programme to help Europe remedy this situation.
Situation becoming worse. The results of a survey on SME access to finance were unveiled by the Commission and European Central Bank (ECB) on Thursday 14 November and are alarming. The survey was conducted between the end of August and mid-October and covered a sample of around 15,000 companies in a total of 37 countries. The results show that, in 2013, a third of European SMEs could not obtain the financing they needed. The youngest and smallest SMEs are affected the most, and companies believe that bank financing conditions as regards interest rates, collateral and required guarantees have become worse.
Loan requests rejected. The information from the survey on loan refusals underlines the generally negative perception that SMEs have of the chances of bank loans. In total, a third of the SMEs surveyed were not able to obtain the full bank loan that they had planned for 2013: 13% of the companies concerned had their loan request rejected, whilst 16% obtained less than they had asked for. Furthermore, 2% of the companies surveyed declined the loan offer from the bank because they found the conditions unacceptable. Finally, 7% of SMEs expected a refusal and therefore did not even bother to ask for a loan. This was particularly the case for young companies as 11% of companies established for 2-5 years did not request a loan because of possible rejection.
Youngest and smallest SMEs suffer. The youngest and smallest SMEs are more likely to receive only part of the financing requested or to have their request rejected. The highest rates of rejection were recorded among micro-companies employing fewer than 10 people (18%) and SMEs that had been active for less than two years (28%). In comparison, only 3% of loan applications from large companies (with 250 employees or more) were rejected.
Stimulating financing on equity financing and venture capital. Insufficient collateral or other guarantees required by banks, and an overly high level of interest rates, are the main obstacles that companies wanting bank financing come up against. However, equity financing (and alternatives) was only used by 5% of SMEs over the period covered by the survey. In general, SMEs are less confident talking about finance with equity investors or venture capital than with banks. The main challenge concerning this source of financing is its lack of availability or prices being too high. It is exactly this point that the Commission wants to remedy with its COSME programme for 2014-2020. The programme will be given a guarantee facility for loans to SMEs and an equity financing mechanism to stimulate the availability of venture capital.
Variable financing conditions in EU. Access to finance is the most pressing problem for 40% of SMEs in Cyprus, 32% in Greece, 23% in Spain and Croatia, 22% in Slovenia, and 20% in Ireland, Italy and the Netherlands, compared with 7% in Austria, 8% in Germany or 9% in Poland. Rejection rates for loan requests are also very high in Greece and the Netherlands (31%), and also in Lithuania (24%). Ireland (16%), Greece and Cyprus (15%) also accounted for the highest share of companies that were so discouraged they did not even apply for a bank loan.
85% of loans still from banks. Half of the loans obtained in 2012 and 2013 were below €100,000. SMEs remain strongly dependent on bank financing as 85% of the loans provided over this period were from banks. Over half the SMEs surveyed had recently used one or more bank products: 32% of companies used bank loans and 39% used bank credit line or overdraft facilities. Bank loans are also the preferred option of 67% of companies looking for an external financing solution. (EH/transl.fl)