But where do these changes come from and how do they materialize?
First of all, there is the conjunction of several unfavorable elements at the banking level which will have a strong impact on SME financing from the beginning of 2021 :
- The COVID-19 crisis, which started at the beginning of 2020 and which will celebrate its (sad) first anniversary, with its period of brutal and almost complete halt of economic activity in the first half of the year...
- Indeed, most SMEs will reach the end of March 2021 with strongly deteriorated profit and loss accounts.
- In the wake of this, the financing obtained during this period, such as EMPs and others, intended to cover the lack of activity, will have a negative impact on the level of balance sheet indebtedness, leading to a vicious circle of increasing reluctance of banks to lend ...
- Finally, barring surprises, again for the banks, the end of the principle of state guarantees for COVID loans (unless, and I doubt it, there is a decision to transform, for example, these EPEs into equity, which would not solve everything, far from it...).
Add to this the very clear fact that banks will increasingly move towards automation and "remote control" of their relations with their clients (they also have profitability concerns to deal with...) :
- ) : it is therefore impossible for entrepreneurs to "defend" their cause and to play the "intuitu personae".
- Total depersonalization of the risk analysis leading to the GO/NO GO of a financing agreement.
- Systematically remunerating the use of an advisor (already being tested at the BNP...).
In essence, a bank's decision to grant or not to grant financing will very quickly become "algorithmic" and whether or not the company obtains it, under more or less good conditions, will largely be the responsibility of a person who will have to be part of the company's management, capable of understanding, translating, valuing and defending each case with the appropriate administrative documents. Quite a programme!
The good news is that (good) financial controllers and financial directors do not have to worry about their professional future, they will become THE fashionable profession, after the "Community Manager", the "developer" of all kinds, and the "Chief Happiness Officer"! !!!
Then, there is a relatively recent phenomenon: the arrival of new private "actors" in the world of SME financing.
These new actors will have (and for some of them already have) analysis and investment criteria that are significantly different from those of the banks. Certainly, they will be more inclined to "play the risk", but obviously not without a counterpart: lower valuations at entry, demand for better profitability...
These new cash inflows could be made for example through equity loans and more likely through a larger capital increase than what was usual until then (probably equal or even majority positions compared to equity investments up to a maximum of 30-35% until then).
In fact, SME managers who will be obliged to call on these new sources of financing will have to prove themselves very quickly:
- Humility in their exchanges with investors
- Acculturation to the language of these investors.
- A great open-mindedness by making sure to be immediately in the co-construction and collaboration.
They will also have to learn to share what, until then, was their preserve: profits, the notion of a full partner, the management of the company itself...
In this new economic context, which has been greatly disrupted by reduced visibility, it will be increasingly important for SME owners to be accompanied in this profound change, for example by hiring the services of a Business Mentor.
We are no longer faced with a few marginal adaptations but rather with a revolution in the positioning and life of the SME owner!
Indeed, through the prism of financing, which is and must remain only a means, we can clearly see what systemic impact this will have on the whole life of the company and more broadly on the way we will have to change our economic system!
ADINVEST International, since 2007-2008 through the construction of its network of certified European mentors (ISO), had clearly foreseen, as early as 2009, this gradual but very real disappearance of banks from the risk financing circuit - whereas risk is in the very nature of entrepreneurship - and the imperative need to build a perspective that would "counteract" this risk by reassuring investors!
The Business Mentor ADINVEST, in his role as a business confidant, can accompany the SME manager in his business project, by challenging him regularly, to help him to live this mutation (and many others…) in the best and most successful way.
Nicolas Stoeckel – ADINVEST International
Jean-Claude Verdier – ADINVEST España
Article reworked for France, based on an intervention in Spain by Mr Jordy Solé y tuya - CEO KREEDIT.