Financing SMEs and Entrepreneurs 2024

36. Portugal

Key facts on SME financing

In 2021, SMEs comprised 99.9% of enterprises in Portugal, employed 71.5% of the labour force and were responsible for 56.8% of the turnover and 66.8% in total investment, including large and non-financial enterprises.

In 2021, the total stock of business loans increased 1%, compared to 2020. In 2022, there was a decrease of -0.4%, compared to 2021. In sum, in 2022, the share of SME outstanding business loans to total business loans stayed around 80% as has been the case for the last five years.

In 2021 and in 2022, short-term loans gradually increased, by 6.4% and 5.2%, respectively. On the other hand, long-term loans increased by 2.7% in 2021 and decreased 1.8% in 2022.Portuguese financial system became restrictive concerning business loans to SMEs.

In 2020, the share of government-guaranteed loans in total SME loans had a steady acceleration, with an increase of 23.3%, demonstrating the sustained public efforts to support SME access to finance, during the COVID-19 crisis. In 2021, total government-guaranteed loans slightly increased to 3.2%, compared to 2020, and registered a decrease of -17.5% in 2022.

The average interest rate for SME loans decreased to 2.48% in 2020, marking the sixth consecutive year of decline. However, in 2021, it had a slight increase to 2.51% and in 2022 an even larger increase to 3.18%, which reflects a setback in SME financing conditions.

Trends in venture capital have been uneven. Total venture capital investments in 2022 increased to EUR 72 million, a rise of 7.5% compared to 2021.

Late payments are still a problematic issue for Portuguese SMEs in both business-to-business (B2B) transactions and payments from public authorities, having been steadily decreasing in the last five years, with no relevant oscillations. In 2022, 41.8% of SMEs reported experiencing late payments. In addition, the time difference between agreed and actual payment is 13 days (increased by 1 day since 2021) in B2B transactions and 10 days (decreased by 12 days since 2021) for the public sector.

Concerning bankruptcies, 2020 closed with a decline of 2.3% compared to 2019, with 2 502 bankruptcies, despite the impact of the COVID-19 crisis on the economy. This decline can be explained in part by government measures that have allowed companies to avoid filing for bankruptcy during the COVID-19 crisis. In 2021, there was also a decrease, with 1 571 bankruptcies (-37.2%) and in 2022, there was again another decrease, with 1 309 bankruptcies (-16.6%).

The number of small and medium businesses supported by the EIF’s European Guarantee Fund have significantly increased year after year, from 12 000 in 2021 to 26 000 in 2022. The same strong results were achieved in terms of jobs supported, which increased from 188 000 in 2021 to 340000 in 2022. This result is due to the large amounts signed in 2021 under the European Guarantee Fund. The EIF has provided support in Portugal under a wide range of programmes and mandates, such as COSME, InnovFin, and the Cultural and Creative Sectors Guarantee Facility. The EIF made five equity investments in 2022, committing EUR 123 million, which leveraged EUR 500 million of equity finance. These figures highlight the largest volumes ever committed by the EIF to Portuguese venture capital and private equity funds.

Table 36.1. Scoreboard for Portugal

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Debt
Outstanding business loans, SMEs	EUR billion			90.2	88.2	87.0	79.7	73.9	70.3	65.8	61.3	57.4	54.1	52.5	58.9	60.9	60.3
Outstanding business loans, total	EUR billion	102	115.8	117.8	114.6	113.8	105.3	99.3	86.5	82.2	77.3	73.1	69.5	67.0	73.9	75.6	75.3
Share of SME outstanding loans	% of total outstanding business loans			76.61	76.96	76.45	75.68	74.41	81.30	80.13	79.36	78.53	77.69	78.35	79.73	80.06	80.16
New business lending, total	EUR billion	64.3	61.8	46.3	45.6	45	45.6	49.1	41.2	33.8	29.8	28.8	31.6	32.7	33.5	20.8	22.0
New business lending, SMEs	EUR billion	28.9	26.4	23.1	9	14.2	12.5	11.9	11.9	11.9	11.3	10.9	11.2	11.8	11.8	7.6	7.4
Share of new SME lending	% of total new lending	44.9	42.7	49.9	19.7	31.6	27.5	24.1	28.7	35.2	37.8	37.7	35.5	36.1	35.2	36.5	33.7
Short-term loans, SMEs	EUR billion	..	..	24.7	22.7	21.3	15.3	13.4	11.5	9.5	9.5	8.9	7.3	6.5	8.1	8.7	9.1
Long-term loans, SMEs	EUR billion	..	..	65.6	65.5	65.7	64.4	60.5	58.7	56.3	51.9	48.5	46.8	46.0	50.8	52.1	51.1
Share of short-term SME lending	% of total SME lending	..	27.34	27.34	25.77	24.47	19.21	18.13	16.37	14.51	15.43	15.53	13.50	12.38	13.89	14.32	15.20
Government guaranteed loans, SMEs	EUR billion	..	..	5	6.8	6.1	6.0	5.8	5.5	5.6	5.7	6.1	6.2	6.3	13.6	14.0	11.5
Non-performing loans, total	% of all business loans	1.50	2.20	3.90	4.10	6.00	9.40	11.80	14.20	15.20	15.00	12.70	7.80	4.60	3.32	2.30	2.05
Non-performing loans, SMEs	% of all SME loans			4.67	5.00	7.33	11.76	14.82	16.50	17.89	17.62	14.65	8.83	5.15	3.87	2.66	2.43
Interest rate, SMEs	%	7.05	7.64	5.72	5.45	7.41	7.59	6.82	5.97	4.6	3.83	3.42	3.13	2.93	2.48	2.51	3.18
Interest rate, large firms	%	5.29	5.92	3.84	3.91	5.4	5.43	4.97	4.37	3.25	2.69	2.14	1.93	1.85	1.70	1.72	2.66
Interest rate spread	% points	1.76	1.72	1.87	2.25	2.01	2.16	1.85	1.60	1.35	1.14	1.28	1.20	1.08	0.78	0.80	0.52
Collateral, SMEs	% of SMEs needing collateral to obtain bank lending	..	..	76.25	81.16	82.63	82.15	83.09	80.14	81.84	79.60	80.98	83.13	86.95	89.88	89.60	88.73
Non-bank finance
Venture and growth capital	EUR million	129	92	70	74	26	53	106	106	102	18	29	30	69	42	67	72
Venture and growth capital (growth rate)	%, Year-on-year growth rate	..	-28.7	-23.9	5.7	-64.9	103.9	100.0	0.0	-3.8	-82.4	61.1	3.5	130.0	-39.1	55.8	7.5
Leasing and hire purchases	EUR million	..	..	53.24	52.42	3.442	3.037	2.666	2.425	2.345	2.295	2.175	2.204	1.879	1.866	467	497
Factoring and invoice discounting	EUR million	..	..	621	733	402	338	376	476	547	441	418	930	855	513	99	113
Other indicators
Payment delays, B2B	Number of days	40	33	35	37	41	40	35	33	21	20	20	12	18	12	12	13
Bankruptcies, SMEs	Number	2 612	3 528	3 815	4 091	4 746	6 688	6 030	4 019	4 714	3 620	3 099	2 694	2 560	2502	1571	1309
1309Bankruptcies, SMEs (growth rate)	%, Year-on-year growth rate	..	35.1	8.1	7.2	16.0	40.9	-9.8	-33.4	17.3	-23.2	-14.4	-13.1	-5.0	-2.3	-37.2	-16.7

Source: See Table 36.4.

Macroeconomic and financing conditions

In 2022, developments in the Portuguese economy were influenced by the consequences of the recovery from the pandemic crisis, the large-scale aggression of Russia against Ukraine and the central banks’ changes on the monetary policy. The large-scale aggression of Russia against Ukraine led to a very high increase in energy and food prices, among other goods and services.

Compared with pre-pandemic figures, economic activity grew slightly more in Portugal than in the Euro Area. The average annual inflation rate reached 8.1% in Portugal and 8.4% in the Euro Area in 2022. According to the Bank of Portugal, by 2023, inflation is forecast to retract to 5.8% in Portugal and 2.4% in the Euro Area in 2024, as prices are stabilizing.

Inflation Rate in Portugal decreased to 2.12 percent in October from 3.58 percent in September of 2023. Inflation Rate in Portugal is expected to be 2.20 percent by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. In the long-term, the Portugal Inflation Rate is projected to trend around 1.60 percent in 2024 and 1.80 percent in 2025.

In 2022, exports were the most relevant component of overall demand, rising by 16.7% (+9.2% than in the Euro Area), with an increase of 5.1% in goods and 43.1% in services, driven by strong tourism-related demand. 

Employment grew by 2% (-0.2% than in the Euro area) and the unemployment rate stood at 6% (-0.7% than in the Euro area), below pre-pandemic levels and the natural unemployment rate. Wages per employee grew by 6.1%, reaching 7.6% in the private sector. 

In 2022, the GDP increased 6.7%, a higher rate than in the Euro area (3.6%), and the general government deficit stood at 0.4% of GDP. Portugal’s public debt-to-GDP ratio contracted considerably to 113.9% in 2022, already below pre-pandemic levels. Thereafter, it is projected to continue a downward path in 2023 and 2024, driven by a favorable growth-interest rate differential and improvements in the general government primary balance.

SMEs in the national economy

In 2021, SMEs comprised 99.7% of enterprises in Portugal employed 71.5% of the labour force and were responsible for 56.8% of the turnover and 69.8% in total investment, including large and non-financial enterprises. Most enterprises (88.7%) were micro-enterprises, while 9.4% were small and 1.6% medium-sized enterprises.

Table 36.2. Distribution of firms in Portugal, 2016-2021

	2016		2017		2018		2019		2020		2021
Firm size (employees)	Number	%	Number	%	Number	%	Number	%	Number	%	Number	%
All enterprises	380,935	100.0%	394,967	100.0%	413,767	100.0%	438,959	100.0%	450,416	100.0%	468,746	100.0%
SMEs (1-249)	379,897	99.7%	393,823	99.7%	412,568	99.7%	437,668	99.7%	449,166	99,7%	467,431	99,7%
Micro (1-9)	335,844	88.2%	347,706	88.0%	364,074	88.0%	387,001	88.2%	399,12	89%	415,888	88.7%
Small (10-49)	37,925	10.0%	39,613	10.0%	41,65	10.1%	43,492	9.9%	42,984	10%	44,139	9.4%
Medium (50-249)	6,128	1.6%	6,504	1.6%	6,844	1.7%	7,175	1.6%	7,062	2%	7,404	1.6%
Large (250+)	1,038	0.3%	1,144	0.3%	1,199	0.3%	1,291	0.3%	1,25	0,3%	1,315	0.3%

Note: Includes non-financial business sector

Source: Statistics Portugal, IP

SME lending

Over the 2010-22 period, SME lending stocks have been declining. The share of new SME lending represented 36.5% in 2021 and 33.7% in 2022, while total business loans increased in 2021 2.3% and in 2022 slightly decreased -0.4%. The share of short-term SME lending represented 14.3% in 2021 and 15.2% in 2022. Banks have been more averse to taking risks from SMEs and therefore have been more restrictive in granting credit.

The share of government guaranteed loans in total SME loans had a steady acceleration, until 2020, with an increase of 23.3%, demonstrating the sustained public efforts to support SME access to finance. In 2021, total government guaranteed loans slightly increased 3.2%, compared to 2020 and registered a decrease of -17.5% in 2022.

Credit conditions

Over the 2009-20 period, banks significantly tightened lending conditions to companies, setting up more restrictive financing terms. SMEs were required to put up higher and better-quality collateral to access bank financing. In 2020, the share of collateral bank lending rose to 89.88%. In 2021, there was no relevant change comparing to 2020 and in 2022, it represented 88.73% of total collateral bank lending shareAs a result, among other factors, the average interest rate for SME loans increased 2.51% in 2021, compared to 2020 (2.48%), and increased again 3.18% in 2022. The interest rate spread between SME loans and large firm loans has been gradually decreasing, reaching 0.8% in 2021, and 0.5% in 2022, indicating an improvement in SME financing conditions.

Alternative sources of SME financing

Venture and growth capital has been oscillating from 2007 until 2022, reaching its peak in 2007, with EUR 129 million and its major decline in 2016, with EUR 18 million. In 2021, the amount of venture and growth capital reached EUR 67 million and in 2022, EUR 72 million.

Nevertheless, the amount of venture capital invested has raised from EUR 39.1 million in 2020 to EUR 48.7 million in 2021. However, in 2022, there was a significant increase to EUR 70.9 million. When looking by business stage, in 2022, early stage was by far the largest recipient with EUR 60.4 million transacted.

Table 36.3. Equity capital invested by business stage in Portugal, 2007-2022

In EUR million

Stage	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Early stage	31.3	43.8	31.3	53.5	10.4	12.2	24.6	40.5	52.3	16.1	15.1	21.5	37.3	36.4	44.8	60.4
Seed	0.5	0.0	0.1	0.1	0.8	1.0	7.2	6.4	4.9	3.4	2.0	2.6	10.5	10.2	7.2	23.9
Start up	30.9	43.8	31.2	53.4	9.6	11.2	17.4	34.1	47.3	12.8	13.1	18.9	26.8	26.2	37.6	36.5
Later stage	98.0	40.1	11.0	12.2	3.3	3.7	5.8	4.9	19.5	1.6	5.1	2.5	15.1	2.7	3.9	10.5
Total	129.3	83.8	42.3	65.7	13.7	15.9	30.4	45.4	71.8	17.7	20.2	24.0	52.4	39.1	48.7	70.9

Source : Invest Europe

Other indicators

Payment delays, an important cause of difficulties in SME cash flow, more than halved from 40 days in 2012, to 13 days in 2022, which represents a sustained decline over the last ten years, with no relevant oscillations since 2020.

In Portugal, the Decree Law 62/2013, of 10th May, establishes measures against delays in payment of commercial transactions, and transposes Directive no. 2011/7/EU, of the European Parliament and of the Council, of February 16, 2011.

Concerning bankruptcies, there has been a decrease since 2012. In 2021, there were 1 571 bankruptcies and in 2022, there was a drop to 1 309 insolvencies. Moreover, the construction sector was the most affected by bankruptcies, with around 15.6% in 2021 and 18.6% in 2022.

Government policy response

The COVID-19 pandemic had a significant impact on various industries worldwide, leading to several important lessons learnt. The lessons learnt from the COVID-19 pandemic will shape the industrial landscape moving forward, with businesses prioritizing supply chain resilience, digital transformation, health and safety measures, flexibility, collaboration, and risk management to navigate future challenges.

Following the impacts of the pandemic, the European Council created the Next Generation EU, a strategic instrument, from which the Recovery and Resilience Mechanism was developed, which includes the Recovery and Resilience Plan. The instrument was launched to mitigate the economic and social impact of the crisis. The initiative aims to promote economic convergence and resilience, helping to ensure long-term sustainable growth and meeting the challenges of the transition to a greener and more digital society.

In Portugal, the Recovery and Resilience Plan is being implemented (implementation period until 2026) and foresees a set of reforms and investments aimed at upturning the country's sustained economic growth. The reforms are organized into 20 Components grouped around three structuring dimensions, Resilience, Climate Transition and Digital Transition. Each component is assigned to at least one of the pillars: green transition; digital transformation; smart, sustainable, and inclusive growth; social and territorial cohesion; health and economic, social, and institutional resilience; and policies for the next generation. IAPMEI, the Portuguese Agency for Competitiveness and Innovation, which aims to foster SME innovation, entrepreneurship, and business investment, launched MAP, a dashboard that helps SMEs have access to and understand its economic and financial indicators according to its sector and size. The mechanism consists of a qualitative and trend analysis that evaluates SMEs financial and economic performance, their main challenges and what can be done to improve the overall performance.

The tool aims to foster financial literacy of companies and entrepreneurs; allows a better-informed decision-making process and a more efficient management, thus early preventing the recovery of companies and provides permanent technical support of IAPMEI.

In 2022, the Early Warning Mechanism Dashboard was released to 236 339 companies in 2022, of which: 194 877 Micro; 40 774 SME; 688 Small Mid-Caps

This year (2023), in the scope of the European Enterprise Promotion Awards (EEPA) initiative, the Early Warning Mechanism Dashboard applied for Category 4: Improving the Business Environment and Supporting Internationalisation of Business, which recognises innovative policies and initiatives at national, regional or local level that make Europe an attractive place to start and operate a business and scale it up in the single market. In the end it was awarded with the Grand Jury Prize, which was specifically created to distinguish the most creative and innovative European project.

The programme "SME Leader", which is managed by IAPMEI and Turismo de Portugal was created in 2008, in partnership with several banks and Portuguese mutual guarantee societies, uses a process of positive discrimination of national SMEs with better risk profiles through a scoring mechanism based on clear performance standards for the whole SME financing ecosystem.

The SME Leader status is a reputation seal created by IAPMEI to distinguish the merit of national SMEs with superior performance. It is awarded in partnership with Turismo de Portugal (in the case of companies in the Tourism sector), a set of partner banks and Mutual Guarantee Societies, based on the best rating scores and economic-financial indicators. SME Leader has access to a set of benefits , such as special conditions for financial products and a network of services, the facilitation of relationships with banks and the prestige associated with the SME Leader status in the relationship with its stakeholders.

The number of “SME Leader” firms in 2021 was 11 218, having slightly decreased in 2022 to 10 239. The most represented sector in these two last years (2021/2022) was Commerce and the least represented sectors were Agriculture and Fisheries.

Figure 36.1. Trends in SME and entrepreneurship finance in Portugal

Note: Interest rates on new loans up to EUR 1 million (prior to 2010) and loans up to EUR 0.25 million (in 2010) are used as proxy for SME loans. Data on interest rates cover only loans granted by banks.

Source: See Table 36.1

Statlink

Table 36.4. Sources and definitions of Portugal’s Scoreboard

Indicators	Definition	Source
Debt
Business loans, SMEs	Performing and non-performing loans outstanding granted by banks and other financial institutions. Performing loans do not include Factoring without recourse. Small and medium sized companies are defined as companies with less than 250 employees and a turnover below EUR 50 million, excluding holding companies. Includes non-employer firms.	Bank of Portugal, Central Credit Registry
Business loans, total	Performing and non-performing loans outstanding granted by banks and other financial institutions. Performing loans do not include factoring without recourse. Includes non-employer firms.	Bank of Portugal, Central Credit Registry
Short-term loans, SMEs	Performing loans; maturity up to 12 months. Excluding holding companies and sole traders.	Bank of Portugal, Central Credit Registry
Long-term loans, SMEs	Performing loans; maturity more than 12 months. Excluding holding companies and sole traders.	Bank of Portugal, Central Credit Registry
Government guaranteed loans, CGF	Government guaranteed loans to SMEs by the public Mutual Counter-guarantee Fund.	Banco Português de Fomento (BPF)
Non-performing loans, total	Loans outstanding overdue for more than 30 days; in the case of factoring without recourse only amounts overdue for more than 90 days are included.	Bank of Portugal, Central Credit Registry
Non-performing loans, SMEs	Loans outstanding overdue for more than 30 days; in the case of Factoring without recourse only amounts overdue for more than 90 days are included.	Bank of Portugal, Central Credit Registry
Non-performing loans, large	Loans outstanding overdue for more than 30 days; in the case of factoring without recourse only amounts overdue for more than 90 days are included. Large companies include holding companies.	Bank of Portugal, Central Credit Registry
Interest rate, average SME rate	No data on interest rates by size of the corporations is available. As a proxy to SME, we considered data on Interest rate on new loans up to EUR 1 million (prior to 2010) and loans up to EUR 0.25 million (onwards). Data on interest rates covers only loans granted by banks.	Bank of Portugal, Monetary and Financial Statistics
Interest rate spread (between average SME rate and large firm rate)	No data on interest rates by size of the corporations is available. As a proxy to SME, we considered data on Interest rate on new loans up to EUR 1 million (prior to 2010) and loans up to EUR 0.25 million (in 2010). For large firms we considered data on Interest rate on new loans over EUR 1 million. Data on interest rates covers only loans granted by banks.	Bank of Portugal, Monetary and Financial Statistics
Collateral, SMEs	The percentage of collateralised loans granted to SMEs in total collateralised loans. Information on collateral is only available from January 2009 onwards. SMEs defined following the EU definition (less than 250 employees and annual turnover below EUR 50 million and/ or balance sheet below EUR 43 million, Com Recommendation 2003/361/EC). Excluding holding companies and sole traders.	Bank of Portugal, Central Bank Registry
Non-bank finance
Venture capital, SMEs	Investment in SMEs. Data include early stage and expansion phases, turnaround and buyout/replacement is excluded.	Invest Europe
Other indicators
Payment delays	Average payment delay in days for business-to-business. All enterprises.	Intrum Justitia, European Payment Index
Bankruptcies, total	Data include all dissolved companies.	COSEC, SA

References

Banco de Portugal (2022), “Economic Bulletin – December 2022”, https://www.bportugal.pt/sites/default/files/anexos/pdf-boletim/be_dez22_e.pdf

Banco de Portugal (2022), “Financial Stability Report, November 2022”, https://www.bportugal.pt/sites/default/files/anexos/pdf-boletim/ref_11_2022_en.pdf

Banco de Portugal (2023), “Bank Lending Survey, January 2023”, https://www.bportugal.pt/en/publications/banco-de-portugal/all/114

Banco de Portugal (2022), https://www.bportugal.pt/en/comunicado/press-release-banco-de-portugal-annual-report-activities-and-financial-statements-2022

Banco de Portugal (2022), https://www.bportugal.pt/en/comunicado/press-release-banco-de-portugal-annual-report-activities-and-financial-statements-2022

Instituto Nacional de Estatística (2020), Enterprises of Portugal 2020, https://www.ine.pt/xportal/xmain?xpid=INE&xpgid=ine_publicacoes&PUBLICACOESpub_boui=553340764&PUBLICACOESmodo=2

European Payment Report (2022), Intrum Portugal, https://www.intrum.pt/empresas/relatorios-e-analises/relatorios/european-payment-report-2022/

European Investment Fund 2023 (EIF), https://www.eif.org/

COSEC, Portugal, https://www.cosec.pt/en/cosec/figures-and-financial-indicators/

INVEST Europe, Fundraising and Investment in Portugal, 2022