In this post you will discover some variables that influence access to financing for SMEs and how alternative solutions can be found.
Rising interest rates have led to a tightening of credit conditions. This situation mainly affects smaller companies. However, there are economic sectors that present greater difficulties in accessing bank financing. Next, we present what they are and the reasons why they present this weakness.
What are the sectoral variables to access external financing?
In principle, according to Survey on Bank Loans in Spain conducted in January 2023 (data relating to the IV Quarter of 2022), reports that, in general, the criteria for granting credit to non-financial corporations have been tightened.
However, credit conditions do not affect all companies equally: the size and the sector in which they operate are two of the main impediments.
There are many variables that influence the determination of sectoral risk:
- Volume of production and sale in recent years.
- Contribution to GDP.
- Installed capacity and level of use.
- Exports and imports.
- Price evolution.
- Ability to create jobs.
- Number of companies operating in the sector.
- Geographical location of the companies.
- Level of delinquency, bankruptcies, number of bankruptcies, closings, etc.
- Aggregate annual accounts of the sector.
- Average collection terms and payment terms.
- Aggregate average ratios for the sector.
- Most relevant companies and their market share.
- Dependence of the economic cycle.
- Main customers to whom they are directed.
- Analysis of the value chain.
- Impact produced by technological changes.
- Ecological impact.
- Legal risks.
Sectors with the greatest problems in accessing bank financing
As indicated by a previous Survey on Bank Loans (corresponding to data from the IV Quarter of 2019), the sectors that have the greatest difficulty in accessing credit are the following:
- Telecommunications and information society: characterized by size, price, quality of service and product catalogue.
- Hotels and restaurants: location, occupancy, payment terms to suppliers, quality of service and price influence.
- Business services: productivity, cross-selling, loyalty and customer service are key.
- Construction: aspects such as collection terms, payment terms, accident rates and the ability to subcontract make the difference.
The perceived risk for these sectors is greater. In fact, it matches the sectoral analysis of bank delinquency carried out by Funcas (June 2022), in which it indicates that hospitality and construction are the industries with the highest bank delinquency rates in Spain, with 8,84% and 8,39% respectively.
Are there other financial solutions for companies?
There are certain industries that require greater investment in assets and, therefore, greater dependence on external financial sources. In the same way, this type of sector is also characterized by being more sensitive to increases in interest rates.
The demand for business financing can be due to several reasons:
- Investments in fixed capital.
- Inventories and working capital.
- Mergers, acquisitions and corporate restructuring.
- Debt refinancing and renegotiation.
Some of the sectors with the greatest problems in accessing bank credit are characterized by needing strong investments in fixed capital, especially construction or technology (in this case, the investments are focused on intangible assets and R+D+i).
Actually, the financial needs are different depending on the branch of activity. For this reason, it is necessary to have sources that offer personalized solutions and an agile response.
The high guarantees required of SMEs that operate in the most vulnerable sectors cause more and more recourse to alternative financing sources.
Resorting to non-banking sources allows you to choose a multitude of formulas, have personal advice and, furthermore, it is not registered with the CIRBE; therefore, it does not consume risks.
Regardless of your economic sector, if you have problems accessing financing in Alter Finance We have the experience to offer you non-bank financing solutions adapted to the needs of your company. You simply have to contact our expert advisers and we will design your plan.