The crisis is far from over, but Bercy intends to continue preparing for the recovery. On Thursday, March 4, the Minister of the Economy therefore invited representatives of the financial sector and SME owners to Bercy to present the new instruments which should help strengthen the financial soundness of companies and encourage them to invest.
While emergency measures have enabled businesses to weather the brunt of the storm, economists are indeed warning of the storms to come. With a weakened cash flow, many businesses could find themselves facing repayment problems. A risk that is all the greater in the country as “Corporate debt was already higher than elsewhere and has increased more in France with the crisis”, insists Benoît Cœuré, chairman of the monitoring and evaluation committee for business support measures.
According to Bercy, corporate debt would have increased by 217 billion euros in 2020. And this “debt wall” could well come to thwart the recovery, as the time approaches to start repaying the loans contracted during crisis. Many SMEs and mid-size companies (ETIs) risk experiencing difficulties when they need new financing. What seriously jeopardize their development projects.
To meet this challenge, Bruno Le Maire therefore presented the two new tools that had received the European Commission’s approval the day before: participatory loans and subordinated bonds, guaranteed by the State. Distributed by banks or investment companies and repayable after eight years, these tools should make it possible to bring 20 billion euros to SMEs and mid-cap companies. “An unprecedented private capital raising in France and in Europe”, according to the minister.
Unlike bank loans, these new instruments will have the great advantage of not being counted as debt on companies’ balance sheets. Placed at the top of the balance sheet, considered as quasi-equity, they will strengthen the financial solidity of the company without modifying its ownership. “The State will not enter the capital of companies. It is a choice that we assume ”, underlined Bruno Le Maire.
However, this particular treatment comes with a greater risk of non-reimbursement. The State, which will guarantee 30% of the amounts (for a small risk premium), could therefore be called upon to settle the bill in the event of default. Bruno Le Maire also recalled that the government had included in its budget “Enough to cover up to 6 billion euros in losses if necessary”.
To clearly show the advantage of these new instruments, Bercy invited three business leaders very interested in this financing. To keep its market share, “Now is the time to invest”, explained Marc Rocagel, president of Options, European leader in event equipment rental. This funding could therefore allow his company to grow by buying other players in the sector, but also to diversify, in particular in a project for cleaning reusable dishes.
Another interested entrepreneur, Steve Risch and his company making gingerbread in Alsace. He would like to modernize his production tool and also sees the urgency “To invest in an e-commerce platform to respond to new modes of consumption”. The participatory loan, by its characteristics and its horizon of eight years, therefore seems to him the ideal tool to allow “For an entrepreneur to concentrate on his job rather than on negotiating with his banker”.
Same enthusiasm at Redex, a family mid-sized company in the industry. Here again, the company has investment needs “In machine tools and innovation”, explains Sylvie Bernard-Grandjean, its general manager. The equity loan will have the great advantage of bringing in capital without bringing in a new shareholder. An important criterion in a family business where there is often a “Fear of loss of power, of not being able to look in the long term”.