What is a Mutual Guarantee Society and how does it work?

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The problems faced by the SMEs Everytime that they need funding. The high cost of credit, the banks' lack of confidence regarding the projects and the excessive bureaucratic procedures and guarantees and conditions make it difficult for these small and medium-sized companies to find a solution to their lack of financing. In today's post, we are going to tell you what is it and how does it work Mutual Guarantee Society. 

What is a Mutual Guarantee Society (SGR)

The lack of information about the types of Sources of funding existing causes problems for the proper functioning and development of the company. The SMEs often resort to self-financing or financing from suppliers or customers, an easy path since there is an established business relationship. However, this entails the limitation of expansion of these small and medium-sized companies due to the excessive reliance on trade credit short term and excess capitalization. 

The SGR are financial entities that enable the access to credit at SMEs with better terms and interest rates. are entities nonprofit and subject to the supervision and inspection of the Bank of Spain.

As we have previously mentioned, many SMEs are unaware of this tool financing, so they do not consider it an option to finance their projects. The following statistics corroborate this statement:


Fountain: www.cesgar.es

How Mutual Guarantee Societies work

For to benefit Of the advantages that this type of financing entails, it is it is necessary to be a participating member. These partners, who are usually the SMEs that need this resource, are the beneficiaries of the guarantees. The endorsements are those provided by protective partners, who contribute resources to the SGR without requesting guarantees.

An example of protective partners can be the Chambers of Commerce, Provincial Councils, Business Associations, Banks, Savings Banks and private companies. 

A Mutual Guarantee Society It is not easily established, since it is necessary meet some requirements:

  • Minimum of 150 participating partners: owners of small or medium-sized companies belonging to a sector or sectors of economic activity and to the geographical area established by the statutes.
  • The participation of protective partners cannot exceed 50%.
  • It takes a minimum capital of 10,000,000 euros in order to establish the company. This capital may be divided into shares with equal nominal value, cumulative and indivisible. 

As occurs with the application for credit, guarantee, financing or any other resource to other entities, a viable project. Therefore, the companies who can opt for this facility are those who present a business idea that can generate profit. 

In general, to become part of a Mutual Guarantee Society, the following steps must be followed:

  1. Present the project: the employer must present the project for which the guarantee is required, accompanied by all the documentation necessary for the risk analysis. The SGR will focus not only on this analysis, but its focus will be the feasibility of the project. 
  2. Become a participating partner: Once the feasibility of the project has been studied, the company becomes a participating partner. and shall subscribe capital, at least one share, in proportion to the guarantee requested. This fee will be reimbursed when the term of the guaranteed operation ends. 
  3. Approval of the operation. The formalization of this guarantee operation entails some costs for the partner: a study commission and one annual guarantee fee

SGR functions

The main function of the SGR is improve access to financing for SMEs to meet a proposed business objective. But in addition, the SGR can also be considered to carry out the following functions:

  • grant guarantees and endorsements to SMEs
  • they negotiate financial lines
  • Centralize and process grants
  • offer information and advice to partners
  • offer training financial


The small and medium businesses must face not only the financing difficulties due to the risk associated with their identity, but also to some major expenses when it comes to obtaining outside resources than other larger companies. 

Ultimately, what is intended with the SGR and other sources of alternative financing is align the difficulties of obtaining resources and improve competition between SMEs and large companies. 

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