More loans to small and medium-sized enterprises in the first half of the year

By Leonidas Stergiou

The regular SAFE survey of the Commission and the ECB for the first half of the year and for the critical period April – September 2021, when the markets from lockdowns opened, shows a significant improvement in the liquidity conditions and financing of companies from a pan-European banking system.

This improvement is also observed in Greek companies of all sizes. Especially for Greek small and medium-sized enterprises, the survey records a significant reduction in the need for bank lending, by almost 50%, compared to 2020. This is mainly due to support measures and financing through guarantees and grants. On the other hand, the decline in need for credit lines was marginal.

Impressive is the fact that the biggest problem faced by the Greek small and medium-sized enterprises during the restart of the economy was the lack of staff (18%), with the difficulty in financing being followed by 16%. In terms of labor costs, Greece appears with the smallest reduction, ie by 27% (including labor contributions).

Analyzing the available bank financing, there is a marginal improvement between 2020 and the first half of 2021. Credit lines remained inadequate in relation to needs, but to a lesser extent than in 2020.

Thus, the financial gap in 2021 was reduced by almost half, compared to the previous year. From the answers given by a sample of Greek small and medium enterprises in the survey, it appears that the overall improvement in financing is mainly due to the marginal relaxation of the criteria by banks and especially to collateral (guarantees).

Bank loan

However, at the same time it is observed that:

First, the rejection rate remains among the highest in Europe, despite falling from 30% to 21%.

Second, the reduction in rejections is accompanied by a reduction in the amounts disbursed.

Third, the number of companies that stated that they do not want a loan has doubled as they have sufficient liquidity (35%), while the percentage that states that they did not get the loan due to a high interest rate remains consistently high (almost 25%). Adequate liquidity is the main reason for not applying for a loan.

A separate analysis published by the Commission shows that the main deterrent factor for Greek small and medium-sized enterprises to get a loan is the high cost of borrowing.

At the peak of optimism

In addition, both the ECB and the Commission analysis show that the companies surveyed for the period April-September 2021, ie after the opening of the economy, both in Greece and across Europe, the estimates for optimistic outlook outweighed. In fact, the Greek small and medium enterprises are presented as the most optimistic for their turnover in the next three years, while those in Cyprus, Romania and Lithuania are presented as the most optimistic for the prospects. Greek small and medium-sized enterprises predict an increase in their turnover in the next two to three years. 30% expect an increase in turnover on an annual basis of more than 20%, while 46% move upwards, but below 20% per year. 15% expect sales to remain stagnant and the rest expect a decrease.

The same analyzes point out that the main reasons for improving companies’ access to bank lending were to increase their turnover and profitability.

Problems

Regarding the biggest problems faced by Greek small and medium enterprises in the same period of 2021, these are:

Lack of suitable staff: 18%
Finding customers: 11%
Production cost and labor costs: 13%
Institutional framework: 9%
12% competition
Access to finance: 16%
Other: 19%

Subsidies

Regarding subsidies and co-financed loans, 24% of Greek small and medium-sized enterprises stated that they had used them in the last six months, 34% that they had not received any subsidy or co-financing, while the rest stated that they were not eligible.