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Repayment of state-guaranteed loans: VSEs in difficulty

Published on September 14, 2022 by Pierre Belhache - 4 mins reading time
VSE/SME Loans Procedures

Since June 30, 2022, the PGE scheme has come to an end, and companies now have 6 years to repay the sums borrowed. However, inflation and soaring energy bills are complicating matters, particularly for very small businesses, which are finding themselves in dire straits.

An unfavorable economic environment

As economic conditions worsen, attention is turning to state-guaranteed loans, distributed during the health crisis by banks to support companies in difficulty. According to the Cour des Comptes, 137 billion euros in EMPs had been granted by December 31, 2021, 70% of them during the first containment period between March and June 2020.

The PGE scheme came to an end on June 30, and companies are now required to repay them within a maximum of 6 years, or 10 years in the case of companies in difficulty.

However, record inflation, driven mainly by rising energy prices, and disruptions to supply chains are a real drag on companies that need to pay off the excess net debt generated by the health crisis and the EMP underwriting.

The war in Ukraine and the 3% rise in the minimum wage since the start of the year are also jeopardizing the economic health of a large number of players with EMPs.

Risk of business failure on the rise

Many professionals are warning of a surge in bankruptcies in France. In April, a study by Altares revealed that by the 1st quarter of 2022, business bankruptcies recorded as a result of safeguard, default or liquidation proceedings in France had risen by over 34% year-on-year.

Initially, the government's business support measures led to a significant drop in the number of bankruptcies, but since May, the opposite has been true.

" We estimate that 20% to 30% of very small businesses are in dire straits, i.e. between 120,000 and 180,000 companies. If nothing is done, I don't think they'll be able to hold out for more than six to eight months," Jean-Guilhem Darré, general delegate of the Syndicat des indépendants et des TPE (SDI), tells EURACTIV.

 

 

Solutions for extending PGE debt repayments

There are a number of ways to extend the repayment period of an EMP. As soon as difficulties arise, a company can request the services of a credit mediator. This public body was set up to re-establish dialogue between the company and its financial partners and facilitate the search for joint solutions. Companies wishing to apply to the credit medi ator must complete an online application form.

Finally, companies in greater difficulty or of larger size have until June 2023 to use the Covid accelerated amicable procedure, which lasts 3 months and involves defaulting on payment.