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Guarantee $ 300 billion of business loans : how the government could improve its assistance plan

The State has committed to guarantee up to 300 billion euros in loans to businesses harmed by the consequences of the pandemic of sars coronavirus. The crisis is effective retroactively from march 16, and is valid until 31 December 2020. All businesses will be eligible to the EMP (loans guaranteed by the State), regardless of their legal form, with the exception of civil societies, real estate and financial institutions.

read also : Coronavirus: the forgotten plan to help businesses

For companies with fewer than 5,000 employees and less than € 1.5 billion of turnover, the guaranteed amount is 90% of the loan. For those with more than 5000 employees, and over 5 billion of turnover, the guaranteed proportion decreased to 70%. The very large companies of over 5000 employees to see their folder directly instructed in Bercy and it was the minister of the Economy himself who gives the final approval. The cost of the State guarantee is 0.25% for companies of less than 50 million euros of turnover and 0.50% thereafter.

The loan can represent up to 3 months of sales in 2019, of the company. No refund will be required the first year. And if the company so decides, it may amortize the loan over 5 years. It is stated that after the granting of the loan secured, the level of competition of the borrower must be above the level of the competition before the date of the march 16, 2020.

to Avoid failures in string

The objective is to ensure that enterprises will not defer their cash-flow problems on to their suppliers, leading to failures in the chain. And while the figures of the ombudsman of credit are surging : the number of files received per day corresponds to the number of files processed per month in 2019.

To this day, 290.000 enterprises have benefited from € 55 billion of credit and an average loan size of approximately 150,000 euros. On the side of the French banking Federation (FBF), are promises that the banks will not make a margin on these loans, even if rates are not capped. But the banks guard against risks in this period, while the risk of bankruptcy has never been higher.

Result, evidence of refusal many more to come up from the ground, with several explanations :

first, like all sectors of activity, the banks have been heavily impacted with employees who are absent, etc, which could take a long time to trigger a response.

companies with a good listing Banque de France are seen to offer a rapid response to their requests. But for a lot of VSES that do not use bank credit or who do not have a listing, the appraisal process is longer. Some sectors are also considered to be at risk now (the tourism, catering and hotel industry in particular, including the time for re-opening are still unknown) and wipe of the refusal pure and simple. In addition, there is evidence of non-response on the part of banks, which prevents businesses to refer to the ombudsman.

read also : SOS Enterprises Coronavirus listening to the bosses on the edge of filing for bankruptcy

very small enterprises (VSES), which are often under-capitalized, are also considered to be more fragile and therefore less ability to repay, and this has led to the refusal. On the side of the public investment Bank (BPI), one is not afraid of a high loss ratio, in light of the experience of the 2008-2009 crisis. However, the Court of auditors had pointed out that the safeguards in the direction of SMES, which were the main targets of the device of the time (80% of the total), had reached a lower level of objectives, in contrast to those in the direction of enterprises of intermediary size (ETI). For the moment, this is what happens, because the companies that enjoy the best quotations Bank of France are the first to be accompanied. More than half of the ETI have requested the EMP, some of which have received requests for personal guarantees, others have been asked of the business plans for over two years, which is almost impossible to achieve at this time. More than 90% of the ETI in question are still awaiting funds.

The minister of Economy has announced easing : the companies in collective proceedings (receivership or liquidation) since the beginning of the year 2020 may be eligible for the scheme. The SMES that are still not eligible, that is to say, those who are in recovery from 2019 or before, will be able to turn to a new device : a system of refundable advances for up to 500 million euros. "The companies that will need reimburse the amount when they generate sales," said the minister.

Germany is more generous with its businesses

If one compares with the German plan of loans guaranteed by the State, enterprises of the envelope beyond the Rhine is of 550 billion and the government has already raised the rate of 100% guarantee for banks to operate fully in the loans. Because, as in France, some businesses considered to be at risk had received from their bank requests for deposits personal. This would allow the businesses of the catering, tourism and events (which are the most at risk since there is no timetable for the reopening possible at this stage) to be able to access more easily to the EMP. In addition, many firms complain that they cannot know, by signing the loan, at which rate they will have to repay. They do not know if the State guarantee will only play if they are filing for bankruptcy or before...

It should be noted that our French companies are more highly leveraged than their counterparts in germany. Their debt was, according to the bank of France in 2018 72% of French GDP, compared to 39% in Germany, which means that the additional debt that will add to our businesses will be much more heavy to wear.

It is absolutely necessary to improve the device as has already been done to the Germans :

to Put the state guarantee to 100% for thes SMES, such as in Germany ;to Request banks to apply the current rates for reimbursement for that there is no surprise then for the companies ;Roll out the duration of loan repayment to 10 years ;Allow the non-repayment for two years so that, as in Germany, these loans can be accounted for in quasi-equity in order not to degrade their solvency in the crisis. Figaro

The Macronomètre, the observatory of reforms in the government, is a site of the Fondation iFRAP in partnership with Le Figaro. It is a tool dedicated to the assessment of the quinquennium of Emmanuel Macron: econometric evaluation in relation to its electoral programme and announcements of his government. With The Macronomètre, the action of the government is to be marked out of 10 each Wednesday prior to the council of ministers and becomes readable in a single glance. The Macronomètre allows each to make a notice on the holding or not of the promises of the president of the Republic and on the effectiveness of the reforms of the government.

The editorial team conseilleMesures for the self-employed : he must (quickly) even more flexible and avoid bankruptcy !Deferral of tax and social charges : a sum vastly under-estiméeSujetLe Macronomètre6 commentairesHalte_à_la_croissancele 23/04/2020 at 12:19 pm

In France we're governed by technocrats incompetent, fanatical neo-liberalism, and from all of the CAC40, where their missions were to transfer employees, to increase dividends and maximise the tax evasion.
There are their application to humans, it is normal that the capitalists will be lost !

yes Yes 1the 22/04/2020 21:49

Germany was prior to the crisis in a diametrically opposite position! a
by our fault: our (ir)responsible popular destroy us for years systematically the economy of the country by strikes and social anarchy. a
our special perfect these misdeeds by accepting and even giving themselves preference to products and services from foreign (German pays the price; I live for over a 1/2 century in Germany and have purchased, with the exception of 3 purchases of occas occasion of very short duration, that cars are French with the 2 CV neuve as a first purchase, and then 4 GS's, then 1 break Peugeot, and then 4 Spaces. Most of the products that our household consumes are made in France except the drugs. My computers are american brand, DELL. Our cycles are the Accel group or expensive forges in europe. Only one of the odds and ends are brand asian! And yet, we have never lived in salary double. This reflects the consumption habits of German except that the "made in France" is replaced by "made in Germany" pure, with the exception of the food that comes from a lot of Italy), to overcome the month-the harmful caused by the social unrest! a
The germans, the Dutch, the danes etc will not help France to get back as they are all out of them for years because of the mess and public opinion would be disastrous for any government which would before the election!

Chris Bourbon 1the 22/04/2020 19:25

Compare Germany managed well in the lax French, we want to laugh, but the subject is too serious. I still predict a civil war, because it is in my opinion the only way to take things in hand or end up running the country. In one case as in another, the system will be reviewed and corrected.

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