Support for small and medium-sized companies with good financial indicators is important during periods of crisis, but the benefit is “less significant” during economic recovery, concludes a study by the Francisco Manuel dos Santos Foundation to be presented this Monday.
“Support a group of small and medium-sized companies [PME] Promising has positive effects, especially in times of crisis”, highlights the work, according to which “through the granting of publicly guaranteed loans, it was possible to overcome restrictions on access to credit in a period of instability in the financial systemensuring access to financing, at reasonable costs, to the most competitive companies”.
According to the study, which, based on the PME Leader program, analyzes the financing of SMEs in Portugal between 2008 and 2018, “this allowed these companies to present a more positive investment trajectory than the others, also avoiding the destruction of jobs. worked”.
“In addition, the financial certification component inherent in a program that recognizes only the best companies also promotes their access to new clients and to domestic and foreign markets,” he adds.
On the other hand, the Francisco Manuel dos Santos Foundation (FFMS) concludes that, “during the economic recovery, when the restrictions on access to credit disappear and the banks compete with each other to finance the best companies in the economy, the benefits of this type of The supports are not so clear”.
“In other words, support for business financing is not particularly relevant in this context”, concludes the work, entitled “The financing of Portuguese SMEs: the crisis and recovery between 2008 and 2018”.
However, he points out, “certification mechanisms that allow customers, suppliers and investors to identify who are the best companies in a certain sector or region can have important effects on the growth of these companies” during periods of recovery.
From the analysis carried out on the evolution of indebtedness and financing costs of SMEs since 2007, it can be deduced that these have decreased in the last decade, with bank loans standing out as “the main source of financing for these companies”but its relative importance is decreasing (from 67.6% of the total financing obtained in 2007 to 48.1% in 2018).
In 2018, almost 90% of the loans granted to SMEs had collateral or associated guarantees, with loans with public guarantees representing 10.5% of bank financing to SMEs.
Regarding financing costs, in 2008 the ratio between financing costs and the financing obtained by small and medium-sized companies was 5.15%, but, as of 2013, the average financing cost “decreased significantly. sustained, reaching a minimum value of 3.04% in 2018”.
Regarding the PME Leader initiative, the study states that “it allowed eligible companies to increase access to bank financing and reduce financing costs, with the participating companies having grown and achieved better performance indicators.”
However, these positive effects are not transversal to the entire period analyzed. The effects are visible especially during periods of crisis, becoming, for the most part, inexpressive during the period of economic recovery”, he notes.
Thus, it can be concluded that public policies to support the financing of SMEs “have an important multiplier effect in periods of restricted access to credit, but do not seem to differentiate when the credit supply is abundant”.
“In summary, given that the market failures that hinder the growth of small and medium-sized companies are widely documented and the prevalence of very small companies is one of the challenges for the growth and competitiveness of the Portuguese economy, the programs that support viable and promising companies to correct such failures, it can have positive aggregate effects, with contained costs”, he summarizes.
“However —he adds— there are relevant challenges that underlie the design of these programs, such as: Which companies should be supported? What type of support has the greatest multiplier effects? How to prevent companies from becoming dependent on such support? How to ensure that programs aimed at small and medium-sized companies do not have the perverse effect of discouraging them from becoming large companies?
According to the FFMS, “these problems they do not have simple and unequivocal answers and deserve further investigation.”
Source: Observadora
