This year 2024 will be, for the majority of companies that took advantage of the credit lines deployed by the ICO (Official Credit Institute) as a result of the Covid-19 pandemic, the first in which these loans will begin to be repaid, after expiring the grace period that they incorporated.
The financial effort that these companies will now have to assume coincides in time with a tightening of the conditions for accessing new credit, together with an increase in its cost as a result of the increases in interest rates promoted by the European Central Bank (ECB). ).
In this context, the Institute of Financial Studies (IEF) predicts financial tensions that can lead to compromised situations in quite a few of these companies. This is explained by Eloi Noya, director of Innovation and Technology at the Institute of Financial Studies and the Barcelona Finance School (BFS), who this week presented a new edition of the Business Barometer of Fintech and Alternative Financing, where these growing difficulties that have today the companies to finance themselves.
Alternative financing can be a solution, although not the only one
“The outlook is not too good,” explains Eloi Noya, “because this year the ICO-Covid loans begin to be repaid, after a long grace period of two and three years. Many companies with credit difficulties will not be able to return them, so a harsh outlook opens up in which bank delinquencies will increase. There will be many companies that will not be able to assume the repayment of the credit, and we will have late payment problems.
This perspective is based, in large part, on the results of the survey contained in the barometer that the IEF has just published, where “the perception persists among companies – explains Eloi Noya – that it is difficult or very difficult to obtain bank credit, and it even becomes a little more acute than in previous editions, after the disappearance of the ICO-Covid lines.
Given this confirmation of the tightening of the conditions to access bank credit, alternative financing, one of the protagonists of this barometer, emerges as a possible solution, although with less weight than in previous editions.
“The percentage of optimists in alternative financing is falling,” confirms Eloi Noya, who assures that “there is a certain optimism, although now with the perception that this alternative financing can be a solution, but not the panacea.”
“A harsh outlook is opening up, in which bank delinquencies will increase”
Eloi Noya (Institute of Financial Studies)
Thus, when asked ‘Do you think that, faced with a possible business default and credit restriction, there will be alternative financing providers that will mobilize and significantly increase credit to cover this general lack of bank credit?’, where 36% of companies stated in 2022 that ‘all suppliers’ will take this path, now that percentage has decreased to 31%.
Those who respond that ‘only some suppliers’ will increase credit are now 56% (50% in 2022), while those who consider that ‘no supplier’ will do so barely represent 2% of the companies consulted, to which is added a 12% of those who respond that they do not know.
Is this alternative financing, generally more expensive, but also more flexible in its conditions, the answer to desperate treasury situations? Eloi Noya, director of Innovation and Technology at the IEF, believes that this would be a wrong approach. “Alternative financing – he explains – works for any type of company, although the majority focuses on medium-sized businesses, and there is still a lack of alternatives for small businesses.”
That said, he admits that it can be a good tool in terms of “debt restructuring, in slightly more stressed company situations”, but defends its potential “in expansion projects that, although interesting, do not fit the criteria.” of the banks. A typical operation that banks do not finance and that alternative banks will finance is the purchase of a company.
2024-02-12 10:34:29
#amortization #ICOCovid #loans #threatens #greater #delinquencies
