The big problem of SME financing

BarcelonaWorking capital is the main financing problem faced by Catalan companies, especially SMEs, micro-enterprises and the self-employed. This is the main conclusion of the debate between the sector director of companies for Banco Sabadell in Catalonia, Aureli Vallès; the director of the strategic consultancy and financing department of the employers' association Pimec, Pere Cots; and the head of Economics at the newspaper ARA, Albert Martín.

With the aim of analysing the main financing needs of companies, the debate has been organised by the newspaper with the sponsorship of Banco Sabadell. "The great need of SMEs is working capital," says Pere Cots, who adds: "We would like it to be investment, because it could indicate that the company is more self-financing for its day-to-day operations, but the reality is that at the level of SMEs, micro-enterprises and the self-employed, working capital is clearly the need par excellence." In this sense, Aureli Vallès indicates that banks have, for current assets, specific products such as factoring and the confirming, in addition to credit policies. "But to grow, companies need investment - emphasizes Vallès-. We have investment as our main objective to provide support and financing to companies," he stresses.

In this sense, the Sabadell manager considers not only financing to be key, but also support for companies, especially the smallest ones. Two out of three companies are clients of the bank and, in this sense, Vallès highlights that the entity has developed many products, but also takes into account the risk of each client, because "there are rules of the game that we must have very clear for the survival of both the bank and our shareholders," in addition to complying with the regulations of the Bank of Spain.

But Catalonia, and also Spain, is a country of small and medium-sized companies, and this network has some advantages, as well as disadvantages, explains Pere Cots. Having a network of medium and small companies gives flexibility and facilities to find suppliers. The volume, on the other hand, "has a positive synergy" and makes it easier to deal with larger projects, as well as to obtain "financing", according to the Pimec representative.

In fact, to facilitate cash flow, the Government announced this Tuesday measures such as promoting the division of contracts into lots to encourage the participation of smaller companies, speeding up the payment of smaller contracts and establishing direct payment from the Generalitat to subcontractors. "It would be the bomb - says Pere Cots -. We hope it will be like this, Pimec has been fighting for this for many years," he says. For the Pimec representative, this is important because, when large contractors delay payment to their suppliers, who are smaller, they create financial problems for them. "Sometimes we find ourselves with the contradiction that it is the small business owner who finances the largest one," he says. The conclusion of the participants is that if large companies paid small suppliers on time, or the administration did it directly in the case of public contracts, SMEs would not suffer so much from working capital and could allocate the financing to investment.

Own products

According to Aureli Vallès, Spanish banking, due to the tradition of a not very open economy, has created very interesting products for financing SMEs that do not exist in other countries, such as confirming, a "very powerful product" for supplier financing, or the factoring, "which is still financing for the client." In addition, the economy has opened up - in the case of Catalonia more than in the State as a whole - and not only for large companies, but more and more SMEs are entering other markets and exporting products and services. "We do not only provide international support to large companies," says Aureli Vallès, who points out that more and more SMEs are jumping into foreign markets, which requires support because "new problems are appearing."

The debate also highlights aspects of the quality of companies. Despite the rise in rates last year, default rates remain at a minimum. The role of public entities is also relevant, in the case of the Official Credit Institute (ICO) or the Catalan Institute of Finance (ICF), especially in the first case for loans linked to the pandemic, which have allowed banks, with this support and accompaniment of public bodies, to provide the necessary credit for the survival of many companies.