The Greek growth model for small and medium-sized enterprises during the period of the crisis will have to change, senior banking officials stress. The majority of demands for corporate financing in the past few years have been coming from cafes, bars, souvlaki shops, bakeries, pastry shops and anything related to food at any time of day, according to senior corporate finance officials who spoke with Kathimerini.
“This growth model cannot be financed anymore as in most cases it is not sustainable, only opportunistic,” one bank official said.
He and other colleagues said that a significant number of workers in the private sector who lost their jobs during the crisis have invested between 8,000 and 15,000 euros from their severance pay into starting a business in the catering sector, supplementing their capital by borrowing from banks.
By renting a space of just a few square meters and using their own labor and that of their relatives, they hope to generate enough revenues to cover two or three salaries. However, four in every five such businesses shut down within the first year of operation, bankers warn, making the credit system extremely wary of financing such operations. There are, of course, a number exceptions. Innovative ideas and sustainable business plans for such enterprises, for example, will continue to get funding.
This year in fact, corporate financing has increased from 2014 due to bank clients’ need for cash.
Data collected by Kathimerini show that in the first four months of the year, total funding from the local credit system to SMEs came to 220 million euros, or 20 percent more than in the same period last year. However, this increase is almost directly related to the effects of the crisis and overall uncertainty, as the financing largely concerns liquidity demands by SMEs that are clients and need an immediate cash injection for various transactions (such as paying suppliers etc).
Among the firms requesting and receiving liquidity are several export-oriented sustainable enterprises active in the production and standardization of food using innovative methods and agricultural producers, as well as businesses dealing in farming supplies and information technology or consultancy firms, travel agencies, forwarding companies etc. These sectors will actually receive most of the funding to SMEs once liquidity reverts to normality.
Only a small share, no more than 20 percent of all corporate funding by the local banks to SMEs, went towards financing new business plans. This is hardly surprising given that the market has virtually frozen. Therefore, the only recipients of loans for business development are tourism accommodation entrepreneurs expanding their units with new wings, renovating or building villas for renting.
In general, bank officials report that a remarkable seven out of 10 loan applications are approved. This is attributed not only to the reduction in demand for corporate funding from banks – as everyone is waiting to see what happens in the Greek economy before getting engaged in any business projects – but also to the fact that the unsustainable enterprises know they do not stand a chance at getting a bank loan.