Banks optimistic about resilience of VSE/SME business

While the economic situation continues to deteriorate, business activity remains resilient, and banks remain serene, counting on the resilience of companies. Bank credit growth is progressing rapidly, and only 5% of companies fear that they will be unable to repay their state-guaranteed loan. Despite the banks' optimism, 2023 is likely to be a difficult year for VSEs and SMEs.

Bank credit and PGE repayments: reassuring signs

Despite the mounting difficulties, banks are showing a degree of optimism. Business activity is holding up well, and companies are still resilient, as the latest bank credit data show.

According to Banque de France figures, year-on-year growth in bank credit reached 7.7% at the end of November 2022, including 5.8% for SMEs alone, despite rising interest rates. The most buoyant sectors were industry (+13.8%) and business consultancy and services (+12.5%). By contrast, bank lending fell in the accommodation and catering sector (-0.9%).

For the time being, there are no major concerns about the repayment of state-guaranteed loans, which total 143 billion euros. The bulk of these loans have been granted to very small businesses, most of which began repayment last spring.

According to Bpifrance's latest business survey, only 5% of companies surveyed fear they won't be able to repay their PGE. This compares with 5% in November 2021, and 6% in May 2022. This reassuring stability is confirmed by Banque de France estimates and initial observations by banks.

A high-risk 2023 for VSEs and SMEs

Although companies have so far shown resilience, caution is still the order of the day, according to the European Central Bank. The economic situation continues to deteriorate, and the outlook for 2023 is gloomier, particularly for small and medium-sized businesses.

After falling to a record low during the health crisis, thanks to the "whatever it takes" policy, the number of business failures in France continues to rise, and is approaching its pre-Covid level.

According to Bpifrance's economic survey, the cash position of VSEs and SMEs deteriorated in 2022, losing 11 points year-on-year. However, the rise in costs was partly absorbed by an increase in sales prices, as practiced by 72% of VSEs and SMEs.

They have also noted a tightening of access to financing: over the last 6 months, 11% of them have had difficulty financing their investments, and 12% their cash flow. Investment is held back by weak demand, but also by the rising cost of credit, which is now an obstacle for 34% of VSE-SMEs, an increase of 24 points over one year.

VSEs and SMEs expect their business to slow down in 2023, due to an unfavorable economic context, supply difficulties and soaring energy prices. They also anticipate recruitment difficulties and a loss of profitability.