The Court of Auditors judges that the loans guaranteed by the State have fulfilled their mission

3 mins read
The Court of Auditors judges that the loans guaranteed by the State have fulfilled their mission

State-guaranteed loans, or PGEs, did the job. This is essentially what the Court of Auditors asserts in one of its public policy evaluation reports, published at the end of July. Flagship measure of support for French companies put in place from the first sanitary confinement of March 2020 in the face of the turbulence of the Covid, these loans have often been welcomed but also criticized by economic players.

on the one hand, the device would have had the merit of bringing a breath of cash to companies already in difficulty, or in any case cautious about the evolution of their activity; on the other hand, it represents additional indebtedness for its beneficiaries, and its reimbursement has raised many fears for the viability of companies. The Elders of rue Cambon have therefore looked into the subject.

Granted until June 30, 2022, the PGEs were guaranteed by the State of between 70 and 90%, and were capped at 25% of the turnover. annual business (or two years payroll for new companies). The overwhelming majority of loans were taken out during the first confinement: out of a total outstanding amount of 137 billion euros granted by banks as of December 31, 2021, more than 70% were released between March and June 2020.

Bankruptcies avoided

According to the Court of Auditors, the results of this public policy are therefore rather satisfactory. Deployed massively and quickly, the system addressed both large groups and smaller companies. “The system was particularly requested by very small businesses, which benefited from nearly 88% of loans as of December 31, 2021 (36.7% by amount)”, underlines the report.

Their distribution was carried out by banking establishments “in good financial health” which offered a product “simple and easily understandable”. The system would also have proved particularly advantageous ” for companies in terms of cost, with a rate including the guarantee premium of 0.25% the first year and 1% to 2.5% the following years”.

In the end, the PGE refusal rate stabilized at around 3%, knowing that approximately two-thirds of these refusals led to recourse to the Credit Mediator, “whose intervention led to the granting of a loan in half of the cases”. Thus, the supply of credit from banks was sustained and companies were able to find a response to their liquidity needs, thus avoiding “massive bankruptcies”.

Still according to the analysis of rue Cambon, the system would have “effectively made it possible to support viable companies affected by the crisis”. The famous zombie companies, suspected for their part of having been artificially kept alive with the aid, would have represented less than 2.5% of the total number of companies.

No improvement in late payment for large groups

Reimbursement difficulties are considered to be “relatively limited”, thanks to the level of subscription and the choice of amortization of the loans, in phase with the financial health of the companies. However, the Napoleonic institution does not rule out all danger: the good performance of reimbursements will depend on the evolution of the economic context and the effectiveness of support tools since the end of the crisis.

“Companies deemed the most at risk by the Court will have to devote more than 9% of their monthly turnover to the repayment of PGE and Urssaf debts (Union collection of social security contributions), and individual entrepreneurs (3% of PGEs by amount, but 19% of beneficiaries) appear particularly vulnerable” , we can still read.

In addition, the risks seem to have been well shared between companies, banks and the State. It is obviously the public authorities who have assumed a larger share than the other two, due to the exceptional nature of the pandemic.

For the rest, “the PGE parameters were rather advantageous for companies, especially the smallest ones, and reassuring for the banks in a context of high interest rates. ‘low interest’. However, the Elders point to a lack of control over the commitments of large groups, and believe that the PGEs granted to them have not made it possible to improve their late payments, which then affect all the actors in the chain.

Monitor companies’ cash flow in real time

Finally, no worries about possible fraud and the cost to public finances: “The cost of PGEs for the State should remain contained (less than 3 billion euros), while they have made it possible to support approximately 700,000 companies to the tune of nearly 140 billion euros”, specifies the Court of Auditors.

To avoid future abuses despite everything, it recommends in particular to carry out an exhaustive check of the beneficiaries of PGEs who have ceased their activity at the time of the subscription of the loan, or to set up real-time monitoring of the situation of companies’ bank accounts in order to improve knowledge of their cash flow.

Read More

Leave a Reply

Your email address will not be published.

Previous Story

Promoters' opinion continues to deteriorate

Next Story

Rising results and acquisition in sight in wood joinery for Herige

Latest from Blog

U.S. Open day two

NEW YORK, Aug 31 (Reuters) – Emma Raducanu’s U.S. Open title defence ended at the first…