Summary
Tight financing is the reason for investments delaying across Europe. The moto of the Banker - The Bigger is better- makes the economic life of SME harder than previous. Another point of view - There is no credit crunch. Government-backed banks aggressively expanding on midcap market.
Analysis
Avoiding the risk of bankruptcy , the Banks increase the price of the borrowing. Some of them declare to take care for the shareholders money and to prevent of some risky loans. Due to facing tight capital conditions the Bankers look for prospective borrowers and need to be sure of repayment and do not follow the old mistakes during the times of upward trends.
ECB has intention to take measures and say to authorities to ensure the lending of the banks. Some politics and prominent are joint the chorus against the Banks for low rates. Obviously the lending is slow down. Data shows in May 2009 annual growth of loan to the private sector 1,8 percent, the lowest since 1992.Tight financing is the reason for investments delaying across Europe.
The moto of the Banker - The Bigger is better- makes the economic life of SME harder than previous. Smaller has to come with more and more detailed in business plan to obtain financing and has to pay more margin then they did in their last refinancing. Lloyd's expects http://uk.reuters.com/article/idUKTRE56M2ZV20090723 corporate impalements in 2009 to be increased 50 percent in comparison with 2008.
Maximum level of debt is go down but for the smaller that did not obtain financing before, they need very strong track record to secure lending or very attractive assets to loan repayment. Following the investment climate, the commercial bankers are willing to finance up to 2,5 times EBITDA.
Another point of view - There is no credit crunch. In Germany ZEW argue against speculation of credit crunch http://uk.reuters.com/article/idUKTRE56M2ZV20090723. The absolute level and the rate of change in loan volume confirm the opinion. Some EU governments, like Italy and UK encourage banks to credit SME's, especially government-backed in UK.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
