Five European banking associations (EBF, EACB, EAPB, ESBG and EMF-ECBC) on Tuesday 6 June formally adopted high-level principles to improve dialogue between banks and SMEs regarding loan applications.
SMEs often struggle to obtain funding from banks and when they do not get appropriate feedback about the reason they have been unsuccessful, this hinders any future attempt and thereby hampers growth. This is the initial observation that prompted the European Commission to invite the financial industry to do more to help small businesses.
“In case of a declined loan application, it is of the utmost importance for SMEs to understand why a bank has refused to provide a loan. It will make SMEs able to improve their projects, the financial standing of their company and will teach them that a loan is not the appropriate instrument for them”, explained the President of UEAPME, Ulrike Rabmer-Koller, at the signature ceremony.
The principles, which have been approved by the banking industry and have the support of the three European organisations representing SMEs (BusinessEurope, UEAPME and Eurochambers), sum up best practice in this field in Europe. They contain requirements in terms of information to be supplied ahead of the loan application, and also in terms of format, content and timetable, to ensure that SMEs are given feedback that will enable them to understand why their loan application was turned down.
According to BusinessEurope’s Director for Entrepreneurship and SMEs, Daniel Cloquet, the feedback given to SMEs should not be “a sort of administrative message” or an “opaque message”, but should genuinely help them to increase their chances of securing a loan in the future.
Although this voluntary initiative lays down principles at European level, it leaves it up to the national organisations to implement them. On the basis of the principles of subsidiarity and proportionality, it respects the structural and cultural differences between member states in terms of SME financing, says Hervé Guider, General Manager of the European Association of Cooperative Banks (EACB).
“In many European countries, there already is a strong dialogue on the needs of SMEs. With these high-level principles, we now enable all markets in the European Union to embrace similar practices”, explained Wim Mijs, Chief Executive Officer of the European Banking Federation (EBF).
Stressing that SMEs are the “lifeblood of the EU economy” and that the “financial system must better respond to their varied needs”, the European Commissioner for Financial Services, Valdis Dombrovskis, announced the publication, on the same day, on the Commission report listing the best national and regional initiatives to help small businesses to identify a broad range of sources of funding, and providing investors and lenders with reliable information on companies.
This document argues that such local initiatives present a high “replication potential” for member states wishing to develop their information architecture on SMEs’ access to financing and may be used as a broader model, once they have proven their worth national level. (Original version in French by Marion Fontana)