14. France
France has approximately 3.9 million small and medium-sized enterprises (SMEs), which account for 99.9% of the total business population.
Outstanding SME loans increased by more than 27.24% between 2019 and 2020, reaching EUR 336 440 million in 2020 as a result of government support measures. Since 2014, the interest rate spread has decreased from 0.8% to 0.3%. Furthermore, SMEs’ access to bank lending remained high in 2020: around 86% of SME requests for cash credits were fully or almost fully granted and 96% of SME requests for investment loans were fully or almost fully served, a figure which has remained stable since the beginning of 2017. The rejection rate has continued to decline (2.38% in 2020).
Private equity investments in French firms decreased in 2020 to EUR 17.8 billion, a drop of 8% compared to 2019. 2 027 firms were financed via venture capital funds in 2020. The number of financing operations by business angels decreased by 20% in 2020 (336 versus 422 in 2019).
Funds raised by crowdfunding platforms soared in the 2018-2020 period, from EUR 402 million to EUR 1 020 million. In 2020, funds raised through crowdfunding financed 13 796 SMEs.
Factoring volumes decreased by 7.5% in 2020 to EUR 323.5 billion, after increasing continuously since 2009. This fall can be linked to the decline in NFCs’ (non-financial corporations) turnover by 7.8% in 2020 compared to 2019, together with some sectoral aspects. Factoring remains the preferred method of short-term financing in the car industry and since this sector was particularly hit by the pandemic, the recession in this industry caused part of the fall in factoring volumes.
Payment delays reached 12.8 days in 2020, the highest since 2015. The increase started in 2020Q2 and a high level of uncertainty led to a sharp increase in Q3, up to 14.4 days, before receding rapidly in Q4. However, this fall was not enough to compensate for the rise of the previous quarters.
The number of SME bankruptcies collapsed by 38% in 2020, at around 31 000, thanks to the measures implemented by the Government to face the economic consequences of the pandemic.
In terms of government SME financing policies, a government loan guarantee scheme was put in place to respond to the cash needs of SMEs impacted by the COVID-19 crisis. The state guarantee covers 90% of the loan for all SMEs. In May 2021, 673 139 firms had obtained government-guaranteed loans, for a total amount of EUR 136.8 billion. The rejection rate was only 2.9%.
Moreover, several measures were put in place by the French government to strengthen firms’ balance sheets in the context of economic downturn in 2020. First, the Economic and Social Development Fund was provided with EUR 1 billion and equity loans were created to support firms with less than 49 employees impacted by the pandemic. The French Government support for SMEs financing also took the form of a guarantee provided to investors that provide equity loans or bonds. Furthermore, a recovery label was created in order to mobilise the savings of the French.
Credit mediation continued to assist French enterprises via an online platform. The number of requests has skyrocketed in comparison with previous years, mostly due to the liquidity problems caused by the global health crisis. In 2020, credit mediation benefited 6 332 SMEs and unlocked a total of EUR 2.98 billion of credit.
France has approximately 3,9 million small and medium enterprises (SME). They account for 99.9% of all enterprises. Among SMEs, micro-firms dominated the business landscape, comprising 96% of all firms and 96.2% of SMEs in 2018. French SMEs employed 47.6% of the workforce and accounted for 40.1% of value added in 2018.1
The Central Credit Register of the National Bank of France collects monthly data on loans over EUR 25 000 granted to enterprises (legal units). The data include both, loans drawn (utilised) and undrawn (not utilised), for enterprises resident in France. Data on both loans to all firms as well as on loans to SMEs (both independent and belonging to a group, but excluding individual entrepreneurs), exist.
The stock of outstanding business loans to SMEs rose steadily between 2007 and 2018 by about 3.8% every year on average, with stronger increases towards the end of the period. The growth rate exceeded 3% for the fourth year in a row in 2019. In 2020, the stock of outstanding business loans to SMEs soared, rising by 27%, due to the Government loan guarantees scheme put in place as a response to the economic consequences of the pandemic crisis. The share of SME loans in the total outstanding loan stock (22.3% in 2020) has remained roughly constant over 2012-2020 period at around 20%. The stock outstanding short-term and long term loans skyrocketed in 2020, respectively by 124.9% and 55.8%.
France has detailed data on drawn loans and undrawn loans. An increase in the proportion of all drawn loans to all loans (both, i.e. the sum of drawn and undrawn) indicates a higher degree of utilisation and hence tighter lending conditions, as well as a worsening of credit availability as has been observed in 2008-09, and again at the end of 2011, though less severely. Since 2012, however, the credit conditions measured by these trends show a relative stabilisation. The utilisation rate stayed constant in 2019 at 87%, and slightly increased in 2020 at 88.7%.
As in most European countries, interest rates for both SMEs and large firms decreased steadily from 2009 until 2019. This trend accelerated in 2020, due to the government loan guarantees scheme. Although interest rates for firms of all sizes declined over this period, this evolution was much more pronounced for large firms than for micro-enterprises (employing ten employees or less) and the spread between interest rates charged to SMEs and to large firms remained significant until 2014. Since 2014, the interest rate spread has decreased from 0.8% in 2014 to 0.3% in 2020.
Source: Banque de France.
The situation of SMEs and very small enterprises (VSEs), the latter defined as enterpirses with fewer than 10 employees and a turnover or balance sheet of less than EUR 2 million, with respect to access to bank finance has been satisfactory in France, illustrated by a continuous progression of credit loans and an overall easing of conditions. The rejection rate (2.38% in 2020), has continued to decline, in line with the trend since 2012. As of Q1 2021, around 86% of SMEs requests of cash credits were fully or almost fully granted. Meanwhile, 96% of SMEs requests of investment loans were fully or almost fully served, a figure which has remained stable since the beginning of 2017.2
Source: Banque de France.
Invested amounts in private equity in French firms decreased by 8% in 2020 compared to 2019, reaching EUR 17.8 billion, , but remain significantly above average levels before the financial crisis (EUR 10 billion in average between 2005 and 2008). The number of firms which are financed via venture capital funds remains above the long term average level : 2 027 firms in 2020 versus 1 739 between 2006 and 2019. 40% of the amounts invested were in firms that opened their capital for the first time in 2020. Among these, 4 out of 5 are localised in France.3
Business angels are few in France (about 12 500 in 2020, up from around 11 000 in 2017). The number of financing operations decreased by 20% in 2020 because of the economic consequences of the pandemic crisis (336 versus 422 in 2019), as well as the invested amounts (EUR 36 million, representing -16 % versus 2019). These investements allowed to create or maintain 2 500 jobs.
Crowdfunding is a method of financing which is increasingly used in France, and which experienced strong expansion in 2019 and 2020. Funds raised by crowdfunding platforms soared in the 2018-2020 period, from EUR 402 million to EUR 1 020 million, with a 62% increase in 2020. In 2020, funds raised allowed to finance 13 796 SMEs and 2 950 start-up. Crowdfunding platforms benefit from a specific regulatory framework since 2014 which enables them to operate without a minimum amount of equity. However, their activity is regulated in order to guarantee transparency and investors protection. Other financial operators can operate through internet platforms without these specific legal status, but they must conform to the classic financial regulatory framework.
Factoring volumes decreased by 7.5% in 2020 to EUR 323.5 billion. The number of ongoing operations (- 10.8%) also decreased in 2020 compared to 2019. The contraction of activity is mostly due to the economic consequences of the pandemic crisis in 2020.
Payment delays, defined as any payment made beyond the contractually agreed term, and measured in terms of late payment days including payments on time (delay = 0), were globally stable between 2008 and 2014 (12 days on average). However, there is a certain heterogeneity in payment delays, due to the size of firms or the sector. The larger the firms are, the more important are the payment delays on average. Considering all company sizes in 2015, the payment delays reached 13,3 days, the highest since the financial crisis, and then decreased steadily again between 2016 and 2019, reaching 11,3 days. However, the economic crisis due to the Covid-19 pandemic stoped this dynamic and payment delays went up in 2020 to 12,8 days.
SME bankruptcies peaked during the financial crisis and decreased again in 2010 and 2011. 2012 and 2013 saw an uptick in the bankruptcy rate for SMEs, a trend that has since continued. Since 2015, SME bankruptcies have decreased by 14%. In 2020, SMEs bankruptcies decreased steadily by 38% thanks to the measures put in place by the Government to face the economic consequences of the pandemic crisis.
Non-performing loans (NPLs) reached 4.7% of all business loans during the crisis in 2009. Since then, NPLs have steadily decreased to 2.4 % in 2020.
Several measures had been implemented to facilitate SMEs financing in a context of economic crisis due to the Covid-19 pandemic.
Government guaranteed loans were set up
A EUR 300 billion Government guaranteed loans scheme was put in place in march 2020 to respond to cash needs for SMEs impacted by the Covid-19 crisis. Government guaranteed loans have been commercialized since march 25th.
Government guaranteed loan is a loan delivered to a firm by its usual bank, thanks to the guarantee brought by the State. This loan is open to all firms until December 31st 2021, everywhere in the territory, whatever its size or legal form. However, this mechanism does not include financial enterprises.
The State guarantee covers 90% of the loan for all professionals and SMEs. For companies with more than 5 000 employees or a turnover above 1.5 billion, the share of the loan guaranteed by the State is 70% or 80%.
The loan amount can reach three months of 2019 turnover or two years of the total gross payroll for innovative companies or companies created since January 1st, 2019. No refund is required in the 1st year. Two to four months before the anniversary date of the Government guaranteed loan, the company has to make a decision : to refund its loan immediately, or to amortize it over 1 to 5 additional years, or to mix the two solutions.
SMEs that want to spread the repayment of their loan can benefit from an interest rate between 1% and 1.25%, depending on the number of years of repayment. Currently, banks committed to propose a maximal interest rate between :
1% and 1.5% for loans repaid by 2022 or 2023 ;
2% and 2.5% for loans repaid by 2024 or 2026.
As of May 7th 2021, 673 139 firms have obtained Government guaranteed loans, for a total amount of EUR 136,8 billion. The average amount granted increase with the size of the firm : EUR 90 000 for 1-9 employees enterprises, EUR 1,3 million for 10-249 employees enterprises, and EUR 12,8 million for 250-4 999 employees enterprises. The rejection rate is only 2.9%.
French Government put in place several measures to strengthen firms balance sheet in the context of sanitary crisis
The sanitary crisis had a major impact on financial situation of French companies. Balance sheet strengthening is an important issue to preserve SMEs investment capacity and to reduce insolvability risk. For this purpose, the French Government put in place several measures to strengthen SMEs balance sheet :
The economic and social development fund was provided with EUR 1 billion. This intervention mechanism supports the financial restructuring of firms in difficulty with more than 250 employees, alongside private investors.
Equity loans were created to support very small and small firms with less than 49 employees impacted by the economic consequences of the pandemic crisis. This financial tool targets SMEs that have difficulties to obtain a Government guaranteed loan, in order to enable them to rebuild cash flow and strengthen their balance sheet. Equity loans allow to finance very small firms with less than 10 employees up to EUR 20 000, and 11-49 employees firms up to EUR 50 000.
The French Government support for SMEs financing also take the form of a guarantee provided to investors that provide equity loans or bonds. This State guarantee allows private investors to raise up to EUR 20 billion to support the rebound of investments.
A recovery label was created in order to mobilize the saving of the French financial institutions that has increased significantly throughout 2020. 147 investment funds have been labelled so far on the basis of a set of investment rules and environnemental, social and governance criterias.
Several sectoral recovery plans were launched for sector significantly affected by the Covid-19 crisis (tourism, tech, aeronautic). All these plans include measures to strengthen SMEs financial situation.
Credit mediation continued to play a strong role in assisting SMEs with their liquidity problems in 2020
Backed by the Banque de France, credit mediation, set up in November 2008, remains a central part of the financing landscape for French SMEs.
Companies encountering difficulties with their bank or their credit insurer can file a request online to start the mediation process. The mediation services in Paris, assisted by departmental mediators from the Banque de France, assess the eligibility of the requests and contribute to finding a solution between the requesting firms and the financial institutions at local level, or if necessary, at a national level.
In 2020, credit mediation was very active to support SMEs confronting the consequence of the sanitary crisis. 14 147 firms asked for credit mediation support, mostly due to Government guatantee loan rejection. The number of requests were fourteen time higher than in 2019. In 2020, credit mediation has supported 6 332 SMEs, unblocked a total of EUR 2,98 billion of credit, and preserved 77 815 jobs.
Source: Banque de France.
References
Association française des sociétés financières (ASF) (2020) L'activité des sociétés d'affacturage en 2020
https://www.asf-france.com/wp-content/uploads/2021/03/202012-Activite-affacturage.pdf
Banque de France (2021) Enquête trimestrielle sur l’accès des entreprises au crédit 2021 T1
https://www.banque-france.fr/statistiques/credit/credit/acces-des-entreprises-au-credit
France Angels (2021) L’investissement des Business Angels en 2020
https://www.franceangels.org/wp-content/uploads/2021/03/France-Angels-Bilan-Investissement-2020.pdf
France Invest/Grant Thornton (2021) « Activité du non-cotéen france :capital-investissement et infrastructure ».
https://www.franceinvest.eu/wp-content/uploads/2021/03/France-Invest-Etudes-2021_Activite-2020_VDEF.pdf
Insee (2020) Les entreprises en France
https://www.insee.fr/fr/statistiques/fichier/4987235/ENTFRA20.pdf
Mazars (2021), Baromètre du crowdfunding en France 2020
https://financeparticipative.org/wp-content/uploads/2021/02/BAROMETRE-CROWDFUNDING-2020-FPF-MAZARS.pdf
Médiation du crédit (2021) Rapport d’activité 2020
https://mediateur-credit.banque-france.fr/sites/default/files/medias/documents/cp_bilan_mediation2020vdef.pdf