SME Guarantee Fund: Fewer Firms Unable To Repay Loans

05.26.2011 By Gavrila Oana

The number of small and medium-sized companies (SMEs) unable to pay back their loans has decreased this year and SMEs have started taking loans for investments rather than mere subsistence, Thursday said Aurel Saramet, head of the country’s guarantee fund for SMEs.

"In the first five months of the year, the rate of non-performing loans guaranteed by the fund decreased 38%, which is a lot. I estimate that, if the default rate was at 7%-7.2% last year, this year it will be at 4.6%-4.8%. This shows SMEs are confident and are aware they need to change their strategies," Saramet said at the MEDIAFAX Talks about SMEs seminar.

He added another sign of recovery for SMEs is an increase in the number of long-term loans, taken for investments.

"Last year, only 19% of loans were long term and went to investments.

This year, such loans account for 29% of the total. This is a good sign that SMEs have started taking loans to boost sales and the number of loans taken for working capital is dropping," said Saramet.

Also, the number of companies in industry taking loans has increased, while the most active companies last year were those operating in constructions and trade. This year, 26% of SMEs requiring loan guarantees operate in industry, compared to just 16-17% during the past years.

The guarantee fund for SMEs granted guarantees of over EUR650 million last year, up over 40% compared to 2009, and the number of contracts increased to 9,000. The bulk was granted to SMEs operating in trade, industry, services, constructions and agriculture.

The guarantee fund for SMEs is a non-banking financial institution held by the Romanian state which guarantees up to 80% of loans granted to SMEs, but no more than EUR2.5 million. The fund has a share capital of EUR160 million.