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France Stimulus plan: Bercy wants to strengthen companies’ equity capital

 

 

 

 

 

 

 

 

 

 

 

 

 

France Stimulus plan: Bercy wants to strengthen companies’ equity capital

Three billion euros will be mobilized to consolidate the capital of SMEs (Small and Medium-sized Enterprises) and VSEs (Very Small Enterprises) that have been severely weakened by the health crisis.

 

This will enable banks to grant 10 to 20 billion euros in equity loans.

 

Initially to prevent companies from sinking, thanks to the carry-over schemes and especially the state-guaranteed loans (PGE), to bail them out sustainably, then by strengthening the ship’s framework.

 

In addition, the government continues the logic it adopted from the beginning of the crisis related to the Covid-19 epidemic with the priority given to preserving the country’s economic sector.

 

This measure to strengthen the equity capital is part of a perspective that is both “defensive” to avoid bankruptcies and “offensive” to allow them to develop.

 

On the other hand, the State does not intend to invite itself directly to the capital of thousands of SMEs.

 

It will only guarantee new participative loans carried by financial institutions, such as insurers or institutional investors.

 

Moreover, while the measures of the emergency plan have enabled tens of thousands of companies to keep their heads above water, they have nevertheless greatly increased their indebtedness.

 

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More than 152 billion euros in loans, including 120 billion euros in state-guaranteed loans, worsened the balance sheets of French companies, which were already heavily indebted before the crisis.

 

“Debt ratios are under scrutiny. Most companies will be able to repay their EGEs, but there is still a need for equity capital of around €10 billion to €20 billion for SMEs and mid-sized companies [ETIs] in particular,” stressed the entourage of Economy Minister Bruno Le Maire.

 

 

 

Read also > FRENCH ECONOMIC RECOVERY PLAN: WHAT TO REMEMBER FROM JEAN CASTEX’S ANNOUNCEMENTS

 

Featured photo: © Wikipédia

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