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Only 4% of state-guaranteed loans (PGE) encounter repayment problems

Between March 2020 and June 2022, almost 700,000 state-guaranteed loans (PGE) were granted by banks for a total amount of over 143 billion euros. These loans have enabled many companies to hold on during the pandemic and to rebuild their cash flows on favorable terms, where their interest rate does not exceed 2.5%, including the government guarantee.

Concern hangs over companies’ ability to repay PGEs in 2023

About 25% of the amounts, in capital, have been repaid ” said Philippe Brassac, President of the French Banking Federation (FBF) in an interview given to BFM Business. ” Only 2% of the number of loans granted gives rise to a request for government intervention via BPI (Public Investment Bank) regarding the government guarantee “.

From 2021, 45% of PGEs have started to be reimbursed

And among the 4% of loans experiencing repayment difficulties, “ many are VSEs and SMEs “. The two most weakened sectors are construction and accommodation and catering, which centralize all recruitment, tendering and invoicing problems.

In case of default by the borrower, the state guarantees the banks a 90% refund for VSEs, SMEs and ETIs. From 2021, 45% of PGEs began to be repaid, and a large wave of companies should start paying their installments from the spring of 2022 (more than 200,000 PGEs), the national credit broker said in mid-December Banque de France, Frédéric Visnovsky. He then stressed that repayments had gone well in 2022, but that difficulties could arise in 2023, especially as the number of corporate bankruptcies is again on the rise.

The risk of default was reassessed upward this summer

The risk of default was not initially seen as high: it was initially estimated at 5.1% of contracted PGEs, then revised downwards in 2021 to 3.1% with the recovery in activity, before being revised upwards this summer to 4.6%. Only one case has become public, namely the tourist group Pierre & Vacances, which saw its PGE converted into capital for more than 200 million euros acquired by the banks.

Even in such an operation, the state refuses to give up its claim. ” When the banks sell their securities, they will pay their share to the government under PGE, states a ministerial source. On the other hand, if a company is liquidated, there is very little chance that the state will get its guarantee back, because the repayment of the PGE takes place after the payment of wages and social and tax debts.

A business loan scheme extended until the end of 2023

Launched in June 2020 to support businesses in the face of the Covid-19 pandemic, a business loan scheme has been extended and extended until the end of 2023 by the government, according to a decree published on December 22 in the Official Journal of the European Union. This assistance, originally intended for small and medium-sized enterprises, is becoming available to large enterprises. Its extension aims to support companies weakened by the war launched by Russia against Ukraine “and which have not found financing solutions with their banking partner or private financiers”, it is specified in the announcement of the decree. For the companies concerned, the loan amount is limited to either “15% of the average annual turnover achieved by the beneficiary in the last three financial years” or to “50% of the energy consumption in the 12 months preceding the month of the request for assistance”. The loans are distributed through the public bank Bpifrance This business support scheme had already been extended in December 2021.

Per 30 June 2022, 288 loans with interest subsidies and repayable advances (another support scheme launched in June 2020) had been granted by the government for a total amount of 255.2 million euros, the Ministry of Finance stated: ‘Economy with AFP. In 2023, the distribution of loans is supposed to remain “targeted” to a limited number of companies, Bercy adds. For the government, “these tools are actually support solutions for companies whose cash flow is particularly affected, especially by the increase in commodity prices, and which have not found a market financing solution” or via an EMP.

(With AFP)