Article by Valérie TALMON, Les Echos Entrepreneurs, 25/09/2014
Credit: an update on financial tools for businesses
"Banks are no longer financing SMEs": this phrase has been bandied about for some years now. The banks defend themselves, claiming that they are continuing to increase their lending and accept almost 80% of applications. In fact, at the end of July, outstanding business loans rose by 1.8% year-on-year. And this at a time when SMEs are struggling to finance their needs.
How to explain it? Schizophrenia? French-style defeatism? More like a single interpretation of a multi-faceted reality.
The banking business has evolved
It's true that nearly 95% of SME financing is provided by banks. However, Anne Binder, vice-president of PME Finance and director of Vox Femina, notes that "their commercial policies and constraints have changed: constrained by ever-increasing security ratios and driven by shareholder demands, they have focused on activities other than direct lending over the past 25 years. Less experienced "corporate" teams, back-to-back loans - often taken out of the bank's outstandings and passed on to the teams of specialized subsidiaries - few products to finance working capital growth, decentralized processing: dialogue has become more difficult with the smallest companies or those going through difficult times...".
Disconnect between the financial and real economies.
The result: a disconnect between the financial and real economies.
And while banks are no longer financing companies in the same way, this market gap has not been filled by other players. In France, business angels and crowdfunding, two "trendy" financing methods, have not been enough to compensate for this change in SME financing. We have to admit that the disintermediation process is slow and chaotic," emphasizes Anne Binder. Despite numerous attempts since the 1980s, the SME financial market has never developed, insurers are still reluctant to invest in SMEs, and investment funds still play an inadequate role. Yet today, more than ever, we seem to be in a favorable phase: SMEs are the focus of attention, at the center of hopes for recovery and innovation.
Relearning how to talk to banks
The good news? Good projects find financing. But for this to happen, business leaders need to relearn how to talk to banks, adapting to their new way of operating and making decisions. It's up to them to understand the operating rules of their financial partners and adapt to them," says Anne Binder. It's up to them to become more transparent and reassuring. And it's up to them to choose the right partner. Entrepreneurs need to win over their bank or investor, and to do so, they need to take the time and resources to open up: reassure them about their project and its prospects, reassure them about their managerial organization and governance, reassure them about their operational organization and mastery of indicators, and finally learn to communicate effectively, systematically and regularly. Open up your board of directors, know how to surround yourself with advisors and equip yourself with dashboards: a strategic cultural shift for companies.
