Over the past few days, the French government has stepped up its aid measures for companies hard hit by the coronavirus crisis. In particular, France has launched a vast program of bank loans, announcing a very generous envelope of 300 billion euros, equivalent to 15% of French gross domestic product.
What is a government-backed bank loan?
The French government has released 300 billion euros to guarantee business loans and encourage banks to support them. The PGE is open to all types of businesses (craftsmen, shopkeepers, self-employed professionals, micro-entrepreneurs, etc.), including associations and foundations. The only exceptions are property companies and companies that fail to meet their payment deadlines with their suppliers. This is a one-year cash loan, but with deferred repayment, covering up to 3 months' sales, or a quarter of annual sales.
This bank loan is guaranteed by the State at 90% for loans of up to 1.5 billion euros, 80% for loans of up to 5 billion euros and 70% for loans of over 5 billion euros. It is distributed by banks at cost, i.e. at the prevailing interest rate plus the cost of the government guarantee, without the banks taking any margin. To obtain a loan, companies are invited to contact their usual bank advisor.
Are the banks on board?
Over 40,000 applications have already been received for the EMP. However, not all banks are playing the business credit game. One week after the launch of the scheme, the government reiterated that banks have undertaken to respond to applications from small businesses with sales of less than 5 million euros within 5 days of receipt.
In addition, they must not take any guarantee or security over the applicant's personal assets, nor require excessive documentation. In fact, to process loan applications, they must rely on their pre-existing knowledge of customers. Institutions are obliged to examine professional applications on a case-by-case basis. In the event of refusal, they must indicate the factors that led to the decision.
François Villeroy de Galhau, Governor of the Banque de France, believes that the mobilization of banking networks needs to be "monitored", but that it "seems strong". He calls on entrepreneurs experiencing difficulties with banks to contact the Banque de France's credit mediation service. This totally free procedure is available in every département.