Insolvent businesses hamper credit expansion
The debt crisis of the previous decade continues to hamper credit expansion, preventing strong growth in Greek banking and entrepreneurship.
The high volume of bad loans remains a concern for local lenders, while the low degree of transformation of Greek companies (with still low productivity and significant fragmentation) and the inherent factors preventing the spread of business risk through capital entities. -risk are the main reasons for the slow expansion of credit in the market, despite the general opinion that the necessary liquidity is available.
The problem lies in the financing of small and very small businesses which, according to statistics, amount to 400,000 out of a total of 800,000 registered businesses. Since the number of creditworthy companies does not exceed 100,000, according to bank data, the financing gap seems to affect 300,000 companies that do not have bank credit, either because they do not contact lenders or because the rest closed for them.
Data presented at a finance ministry meeting last week showed that 60% of loan rejections are due to poor corporate credit ratings; these are mainly small and very small enterprises which either have negative data recorded in the Tiresias register of borrowing companies, or have debts to banks and / or the State. The question is how all these companies can get out of the blacklist and regain access to bank financing.
According to bank data, 14% of applications are rejected either because of years of financial loss or their turnover does not justify the amount of funding requested; 16% of candidate companies are turned down because their business plans are deemed unsustainable, highlighting the increased need for advice that banks will need to develop to help companies turn their business ideas into sustainable financing proposals.
The need to support SMEs also stems from the Bank of Greece statistics on bank lending, which reveal the predominance of large companies in the loans issued. Figures included in the European Central Bank’s AnaCredit database for loans above € 25,000 show that only 680 large companies account for around a third of bank lending in Greece.