Government Guaranteed Loans: How Will Businesses Survive?

Set up very quickly at the start of the Covid crisis, the loans guaranteed by the State saved thousands of companies: half a million had access to them! But will they be able to survive without the crutches of the state?

This is the whole problem of this return. As the numbers show, these state guaranteed loans have been a success. It was the smart step to take (with short-time working) and we must salute both the government and the banks who really played the game. We tend to talk more often about failures than successes, there have been a few hiccups here and there, but the truth is that in the vast majority of cases the loan files were processed quickly and the businesses that needed the funds did. Nicolas Barré refers the skeptics to the following two figures: during the 12 months preceding the Covid crisis, banks distributed 70 billion in loans to companies. Since then, in less than six months, in half the time, they have distributed almost twice as many state-guaranteed loans, 120 billion. The state and the banks were there.

But now we have to get out of it.

This is where it gets harder. These loans, which can be spread over five years, must be repaid. And companies that have benefited from this crutch should not find themselves with a wall of debt just when activity picks up again, where it is necessary to invest, when partial unemployment schemes are reaching their end. In short, just when the loads increase. Hence two important measures to prevent companies from being taken by the throat. The first, Bruno Le Maire announced this Tuesday morning in the columns of Echoes. It is an agreement with the banks so that the rate of these guaranteed loans remains very low, between 1 and 3%, throughout the duration of the loan. The banks were hoping for a higher rate. But their interest is also that the companies which were very indebted during the crisis can repay and do not go bankrupt. It's a good compromise.

The other measure aims to strengthen the capital of companies.

Yes, because the problem with French capitalism is that it lacks capital. Companies have too much debt and not enough capital, which hinders investment. So as there was no question of the State becoming a shareholder in thousands of SMEs, Bercy found an intermediate solution with the establishment of what are called participatory loans, very long-term loans which are almost like capital. Let's not go into details, let's keep the idea: companies have suffered an incredible shock with the Covid. Beyond the short term, the State provides them with support over several years. It is new. And if with that some continue to claim that the government policy is too liberal, it is because they missed the last episodes.