SMEs cut dependency on bank credit to half
A study conducted by the Francisco Manuel dos Santos Foundation has found that Small and Medium Enterprises (SME) have reduced their dependancy on bank financing over the past decade.
It also shows that the cost of financing has gone down by almost a half in 10 years and that less than 50% of borrowing is owed to the banking system.
Borrowing from banks had represented over two-thirds at the end of 2007 and fell to less than a half by 2018.
The study which was coordinated by Clara Raposo, President of ISEG – a business management and economics higher education establishment — also revealed that the support provided during the crisis to companies had had positive impacts.
“Despite bank loans continuing to be the main source of financing for small and medium-sized companies, its relative importance has gone from 67.6% of the total financing obtained in 2007, to 48.1% in 2018”, states the study ‘The Financing of Portuguese SMEs: From Crisis to Recovery 2008-2018’ by Clara Raposo (ISEG), Cláudia Custódio (Imperial College) and Diana Bonfim (Banco de Portugal).
The study found that the reduction in the proportion of bank loans had been replaced by an increase in the proportion of intra-loans within companies in a group (36% in 2018) and by issuing bonds (4.8%). When it comes to large companies, the gulf is even larger with bank loans only representing 23.5% of the total.