Explosion in small business loans

By Leonidas Stergiou

Loans to small and micro-enterprises are currently exceeding 600 million euros, according to bank estimates, which consider how May will close and how June will evolve in order to proceed with any adjustments to the targets.

The key to increasing loans to smaller companies, but also the almost zero creation of red loans, is due in large part to the availability of many co-financed programs. A big boost to the market was given this year by the banks’ contracts with the Pan-European Guarantee Fund. Pan European guarantees up to 70% of the loan, thus reducing the risk for banks, with the latter having more room for more flexible credit criteria. Each bank, depending on the clientele and the criteria defined by the medium and large companies (eg turnover up to 2.5 billion or turnover up to 5 billion) and the combination of other co-financed programs (Hellenic Development Bank, NSRF etc), have created different solutions, with total amounts up to 4 billion euros available by the end of 2022 that can be expanded to a total of 6.5 billion by 2023. The new Development Law will also contribute upwards.

Disbursements

According to bank data, the disbursement rate so far is above the target. Indicatively, in the first quarter, the new small business loans exceeded 300 million euros, while by the end of April the amount reached a little below 500 million euros. More than half of the 500 million euros were disbursed in March and April, that is, after the start of the war in Ukraine.

Applications

The data for the applications show a corresponding picture. The number of market applications in the first four months of the year shows an increase of 11% compared to the same period last year. The increase compared to the last four months of 2021 is 25%. This is another indication, as in the last months of each year most disbursements are observed. Especially for April, bank data show that applications increased by 40% compared to April 2021. Applications in April were also increased by 22% compared to February 2022, ie before the effects of the war in Ukraine began. .

Red loans

Banks are reassuring about the arrears of small business loans. As they report, there is no upward trend, a fact that is largely attributed to the availability of many co-financed programs.

Forecast revision

Nevertheless, banks consider May and June to be crucial months for a better picture, both in terms of lending and trends in arrears. As they explain, the disbursements recorded are a product of applications from previous months. Therefore, the launch of March and April disbursements does not concern lending decisions and applications of the same months, but well before the Ukrainian crisis. In addition, April had fewer working days due to Easter and the four days of May Day, something that could affect applications and appear in disbursements after May or June.

However, the annual target for banks for the time being remains the disbursement of small loans of 1.6 billion euros for 2022, compared to 1.4 billion in 2021 and 2 billion euros in 2020. The same sources state that if the same trend, then the target of 1.6 billion euros will be revised and in the first phase may reach over 1.7-1.9 billion euros.

The programs of the banks

THE Eurobank, with the contracts it signed in December with Pan European, will provide a total of 580 million euros in loans. Of this, 500m euros relate to small and medium-sized enterprises and the remaining 80 to large enterprises. The deadline is December 27, 2023 or until the available funds are exhausted.

H Alpha Bank signed two contracts at the end of December 2021 under the “Capped and Uncapped portfolios” of the Pan European Guarantee Fund- EGF, with the aim of offering guarantee financing programs aimed at small and medium-sized enterprises. 600 million euros with a final release date of 31.12.2022 (signing of contractual documents).

THE Piraeus Bank signed a € 520 million contract with Pan European at the end of 2021, creating a total financing package of € 800 million (€ 300 million for large companies and the remaining € 500 million for small and medium-sized enterprises). These loans are provided until the end of 2023 or until the available funds are exhausted.

THE National Bank has created a total package of 2.1 billion euros, which, however, comes from four different contracts with the Pan-European Guarantee Fund. The first period for the availability of the programs ends in June 2022. There will be a new period until the end of the year and it will most likely extend in 2023 or more until the funds are exhausted.

Financing and refinancing

The total guarantees signed by Greek banks with Pan European amount to 2.7 billion euros, which potentially relate to financing totaling 6.5 billion euros. The program’s availability expires at the end of 2023, but for some banks by mid-2022. the ependyseis.gr.

The aim of the new guarantee program is the immediate strengthening and support of small and medium-sized enterprises in all sectors of the economy, in order to address the financial impact of the Covid 19 pandemic, covering the needs of working capital and financing of investment projects. In addition, the possibility of refinancing existing business loans under certain conditions is provided.

Funding limits range between € 17,000 and € 1 million for small businesses and between € 10,000 and € 2 million for medium-sized ones.

Eligible costs

Eligible costs for the implementation of investment and business plans include:

– Investments in tangible and intangible assets and working capital.

– Transfer of property rights to companies – provided that the transfer takes place between independent investors.

– The VAT that, in any case, is related to the financed investment / acquisition.

– Bond loan agreement (bilateral, non-convertible)

– Credit agreement of open open debt account to serve the working capital limit.

– The refinancing of existing liabilities, except for the mutual account.

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