Business loans and interest rates

2023-06-14 07:18:59

Loans to companies have exceeded 4% interest for the first time in fifteen years, according to data from the Bank of Spain which, in its latest records for the month of April, reflects the weighted average of recent times.

These are loans to companies for an amount exceeding one million euros, with a significant increase that is putting pressure on the financing plans of companies.

Debt pressure and new financing strategies

If we analyze the rises in interest rates that the European Central Bank (ECB) has shown, the current levels are better explained, located more than three points above of those registered a year ago, when companies were financed at 0.9%.

In loans of up to 250,000 euros, the cost of debt is already 4.5%, while in those between 250,000 euros and one million euros they amount to 4.2%. A increase in debt that is forcing companies to change their strategy.

For this, one uses the non-bank financing, containing investments or carrying out disinvestments. In fact, during the first quarter of the year, according to the IGM firm, the Credit Suisse crisis substantially reduced the bond issues with which large companies finance themselves in the markets.

This is stated by La Vanguardia, which gives the example of how large groups such as Amadeus, OHLA or Cepsa have anticipated interest rate rises buying back debtwhile others, especially construction companies such as Sacyr or ACS, have reduced liabilities thanks to divestments.

A denoted fact also because of the non-payments that during the last year the companies in our country have been enduring, as well as the debt growth progressive due to the general rise in prices.

European funds: a solution?

Between the financing alternatives to which companies resort include loans from the EIB and the option of participating in projects supported by European funds, which may now have some momentum after the Government’s approval of the latest requests due to the electoral advance.

And it is that the central Executive must send to the European Commission before the end of July the final approach to receive the about 84,000 million additional euros in community loans.

Among small and medium-sized companies, the employers’ association Cepyme has been warning of the increase in financial pressure, as well as the current inflation scenario, which has forced many companies to require payment of invoices beforehand.

Finally, if we analyze the short term forecastthe ECB reported in its latest report that the banks acknowledge having tightened the granting of credit to companies and that they will continue to do so in the coming months.