The financing of the company has been subject to our blog tickets previously, because it is precisely one of the keys to the continuity and development of the company in the market that operates. With regard to external financing, one of the most frequent sources are financial or bank credit institutions, which SMEs and large companies go in search of negotiating deadlines, amounts and procedures, which is specified in the financing flow .
In this sense, the State has arranged different laws in this regard, such as the Law on the Promotion of Business Financing, which entered into force at the end of April 2015 and speaks in its title I of:
“Improvements of bank financing to SMEs” and specifically, in its chapter I, of the “ rights of SMEs in cases of cancellation or reduction of flow of financing. ”
Explanation of the Law
It is best to start explaining the law and the impact it has for SMEs as with those we work with. They are only 4 articles, and the last two only refer to the fact that the established rights are inalienable, since the Bank of Spain will exercise its sanctioning capacity in case of non -compliance (as a slight offense, or in their serious case, if there is repeated breach) , but the important article is 1, where it is established that:
“Credit entities will notify, at least 3 months in advance, their intention not at 35%”
and there are more:
“The term of 3 months will be computed according to the expiration date of the largest credit contract than those that make up the financing flow”
These conditions are applicable to all SMEs and people who exercise economic activities, that is, autonomous. Therefore, there are all companies that have less than 250 workers and have a sales volume of less than 50 million euros or a balance of less than 43 million euros of assets (and highlight the “O” and the “Y” ).
there are 6 reasons why the entity may not respect that period of 3 months:
- Because the financing is less than 3 months.
- Because SME enters the creditors or extrajudicial agreement of payments.
- For breach of SME’s obligations.
- For common agreement on termination.
- For cessation of the relationship derived from capital laundering issues.
and the most important:
- Because within that period of 3 months the situation of the SME or the third debtor whose credits have been ceded, have worsened in a supervening and significant way.
The law provides for a whole series of information that the entity must send to the SME as support for the decision it is making and that is detailed in article 2.
the role of financial entities
After all this exposure of the law, we have to start making considerations from the management point of view. Because what seems like an ease, can become a problem. This occurs for the following: the financial entity, being forced to communicate a future cut, must have data in advance on future renovations. And must comply, because if not, it can be sanctioned.
Therefore, more and more, the most efficient entities begin their requests for information and analysis more than 3 months in advance of the expiration (generally 5 months, of which 2 are to analyze and 3 in advance in case it goes there is reduction).
Now, the entities ask for more: currently, they no longer conform to the current information, (IS of the previous year, VAT, IRPF and little more), but ask companies to inform about how they see themselves in the moment of renewal, that is, within 5 months, and this involves that the financial entities themselves ask for results and provisional balance accounts.
Does it affect me if I’m SME?
Perhaps for medium -sized companies -which the law defines as those with more than 50 workers and more than € 10 m of balance or sales -this can be a resoluble issue, but for a small or microenterprise it is complicated, and Let’s not say for an autonomous, since, for most of these companies/freelancers, their only accounting is the one that facilitates their manager or tax advisor, and that is basically carried out for fiscal statements.
Reading the law, it is transluded that the requests/information coverage that entities can request, and what this means of pressure from the entities on small and microenterprises, recalls an article of the Law of Payment Services (yes, the one that transposed the regulations of SEPA), in its article 26.
In its second paragraph it is exposed:
“provided that it has been agreed in the framework contract, the payment service provider may reserve the right to block the use of a payment instrument for objectively justified reasons related to the safety of the instrument of Payment, the suspicion of an unauthorized or fraudulent use of the same or, in case it is associated with a line of credit, if its use could be a significant increase in the risk that the order can be unable to deal with its obligation Payment. ”
Did you know that the bank can block a transfer order for a “significant increase in risk”, and that is a purely subjective appreciation? It is a law of the year 2009. If this can be done, the entity will not have more strength to ask a company that if you want a renewal, it will tell you how it will be next year?
plan or plan
We want it or not, they are forcing us to plan. It will be necessary to dispose, not a business plan, but at least a financial or treasury plan, to an average term. These types of plans require an exclusive dedication to polish all the edges that as we see- and we have only pointed out those most important- they are difficult to polish if time is not available. That is why in Verum, in regards to this type of services, we offer a comprehensive financial planning service so that our clients do not get any unpleasant surprise with the renewal of their financing lines.
Contact us at firstname.lastname@example.org and +34 96 321 97 88
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