The 2011/12/09 at 06:45
Cécile Boutelet, in Berlin
The KfW Bank is clear on the issue: German SMEs do not fear any mid-term clampdown on or increase in cost of credit, despite the tense financial and interbank market situation due to the euro crisis. According to a survey carried out amongst 12,000 companies generating under 500,000 euros in turnover (the definition of an SME in German terms), German SMEs consider themselves well armed to face the increase in financing risks and the slowdown stemming from the economic situation. The SME barometer is particularly useful for measuring German economic health. The survey reminds that SMEs are the prime driving force for employment in Germany: they are singlehandedly responsible for the creation of 1.8 million jobs in 2010, whereas the public sector and major companies have tended towards downsizing.
Three factors account for the relative optimism of these companies. Firstly, they have access to a sound financing structure. The KfW survey shows that German SMEs have maintained their profit ratio at 5% between 2005 and 2010 even though they were heavily hit by the 2009 crisis. This has enabled them to increase their equity ratio from 22.4 % to 26.6 % between 2005 and 2010. “These companies had the means to react very swiftly to market changes so as to keep their profit ratios, for example by cutting their costs,” Margarita Tchouvakhina, from KfW Banbk. “Today, SMEs have very good equity rates, which means that they have even greater capacity to finance their investments themselves.”
The second factor is that the slowdown expected due to the economic situation in 2012 means that companies have slashed their investment projects, hence their requests for loans. “Savings banks and cooperative banks are always likely to provide loans to SMEs,” recalls Margarita Tchouvakhina. A third factor comes into play on the side-lines, but is more and more conspicuous: alternative financing solutions. While these are far from the stage of replacing bank credit, they are increasingly sought after, and in the eyes of companies, are new forms of external financing that are more flexible than traditional banks. In this way, the BondsM, instruments created by German regional stock markets in 2010, allow large unlisted SMEs to get direct financing from financial markets. This flexibility is welcome at a time when the markets being targeted are rapidly growing countries (such as China or India) located far from Europe, which until now has absorbed 40% of German production.