Figaro
The State is committed to guarantee up to 300 billion euros in loans to companies damaged by the consequences of the coronavirus pandemic. The crisis mechanism is effective retroactively from March 16 and valid until December 31, 2020. All companies will be eligible for EMPs (loans guaranteed by the State), whatever their legal form, except real estate companies and financial institutions.
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For companies with less than 5,000 employees and less than 1.5 billion euros in turnover, the guaranteed amount is 90% of the loan. For those with more than 5,000 employees and more than 5 billion in turnover, the guaranteed quota drops to 70%. Very large companies with more than 5,000 employees see their file directly processed in Bercy and it is the Minister of the Economy himself who gives the final agreement. The cost of the State guarantee is 0.25% for companies with a turnover of less than 50 million euros and 0.50% beyond.
The loan may represent up to 3 months of the company's 2019 turnover. No reimbursement will be required for the first year. And if the company decides, it can amortize the loan over 5 years. It is clearly specified that after the granting of the guaranteed loan, the level of assistance of the borrower must be higher than the level of assistance before the date of March 16, 2020.
Avoid chain failures
The objective is to avoid that companies transfer their cash flow difficulties to their suppliers, leading to chain failures. And this while the figures of the credit mediator are rising sharply: the number of files received per day corresponds to the number of files processed per month in 2019.
To date, 290,000 companies have benefited from 55 billion euros in credit, an average loan of around 150,000 euros. On the side of the French Banking Federation (FBF), we promise that the banks will not make a margin on these loans, even if the rates are not capped. But banks are guarding against risk during this period, when the risk of bankruptcy has never been higher.
As a result, more and more testimonies of refusal are coming from the field, with several explanations:
First, like all business sectors, banks have been strongly impacted with absent employees, etc. Which may have taken time to trigger a response.
Companies with a good Banque de France rating were offered a quick response to their requests. But for many VSEs who do not use bank credit or who do not have a rating, the investigation procedure is longer. Certain sectors are also deemed to be at risk from now on (tourism, catering and hotels in particular, whose reopening times are still unknown) and are being rejected outright. In addition, there are non-responses from the banks, which prevents companies from going to the mediator.
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Very small businesses (VSEs), often less capitalized, are also deemed to be more fragile and therefore less able to repay, which has led to refusals. As for the Public Investment Bank (BPI), there is no fear of a high loss experience, in the light of the experience of the 2008-2009 crisis. However, the Court of Auditors noted that guarantees for SMEs, which were the main targets of the system at the time (80% of the total), had reached a level below the objectives, unlike those for companies intermediate size (ETI). For the moment, this is what is happening, since the companies that benefit from the best Banque de France ratings are the first to be supported. More than half of mid-sized companies have applied for the EMP, some have received requests for personal guarantees, others have been asked for business plans over two years, which is almost impossible to achieve at this time. Over 90% of the midcaps in question are still awaiting funds.
The Minister of the Economy has announced flexibility: companies in collective proceedings (bankruptcy or compulsory liquidation) since the beginning of 2020 may be eligible for the device. SMEs that are still not eligible, that is to say those that have been recovering since 2019 or before, will be able to turn to a new device: a system of repayable advances for 500 million euros. " Companies that use it will reimburse this amount when they generate turnover ," said the minister.
Germany more generous with its companies
If we compare with the German plan of loans guaranteed by the state to companies, the envelope across the Rhine is 550 billion and the government has already raised the guarantee rate to 100% so that banks fully operate loans. Because as in France, some companies considered at risk had received from their bank requests for personal guarantees. This would allow catering, tourism and event companies (which are most at risk since there is no possible reopening schedule at this stage) to have easier access to the EMP. In addition, many companies regret not knowing, when signing the loan, at what rate they will have to repay later. Nor do they know if the state guarantee will only work if they go bankrupt or before…
It should be noted that our French companies are more in debt than their German counterparts. According to the Banque de France in 2018, their debt represented 72% of French GDP against 39% in Germany, which means that the additional debt that will be added to our businesses will be much heavier to bear.
The system must absolutely be improved, as the Germans have already done:
- Set the state guarantee to 100% for SMEs like in Germany;
- Ask the banks to apply the current rates for reimbursement so that there is no surprise for businesses afterwards;
- Spread the loan repayment period to 10 years;
- Allow non-repayment for two years so that, as in Germany, these loans can be recognized as quasi-equity in order not to deteriorate their solvency at the end of the crisis.
Figaro
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