Financing SMEs and Entrepreneurs 2022

41. Spain

Key facts on SME financing

The COVID-19 pandemic has triggered a global health, social and economic crisis unprecedented in modern times. As a result, the government established a series of measures in order to contain the spread of the virus. The introduction of significant restrictions on the mobility of people and the activity of certain sectors caused GDP to contract by 10.8% in the whole of 2020. In the first quarter of 2021, GDP was still 9.4% below the level registered at the end of 2019.

National authorities in fiscal, monetary, regulatory and prudential policy have had to gradually adjust to the evolution of the pandemic in order to tackle its impact on the private sector. As a result, financing conditions for companies in Spain have remained relatively favourable during this crisis and the cost of new loans has remained historically low. For instance, new business lending grew by 2.6% in 2020, reaching EUR 357 billion, and new SME lending remained stable, reaching EUR 173 billion.

In 2020, total outstanding business loans grew by 8.3% and reached EUR 471 billion, while outstanding SME loans experienced a greater increase (10%) to total EUR 241 billion. As a result, SME loans currently account for a greater share (51.2%) of total loans compared to large companies.

In 2020, 4.51% of loans in Spain were non-performing (NPLs). This level is the lowest since 2008 and is the result of the governmental action in reducing non-performing loans that began in 2013.

This improvement in financing conditions is reflected in the decline of the share of SMEs needing collateral, which stood at 20.8% in 2020, the lowest level in the observed period. Similarly, there has been an upward trend in the percentage of SME loan applications, which reached 42.4% in 2020. This evolution is compatible with the reduction in the loan rejection rate to 3.85% registered in the survey on the access to finance of SMEs in the Euro area (SAFE survey).

The volume of private capital investment in Spain reached EUR 4 billion for a total of 765 investments in 2020. The sectors that received the largest volumes of investment were Communications (28%), IT (25.4%) and Consumer Products (10%).

The number of bankruptcies stood at 3 394 in 2020, which represents a decrease of 9.3% compared to the previous year. This decline can largely be ascribed to public support mechanisms such as ICO (Instituto de Crédito Oficial) loans and the ERTE furlough scheme.

Table 41.1. Scoreboard for Spain

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Debt
Outstanding business loans, SMEs	EUR billion	..	..	..	..	..	..	..	293	258	247	263	229	219	241
Outstanding business loans, total	EUR Billion)	893	952	915	896	840	708	609	545	518	493	477	446	435	471
Share of SME outstanding loans	% of total outstanding business loans	..	..	..	..	..	..	..	53.79	49.85	50.10	55.14	51.35	50.34	51.17
New business lending, total	EUR Billion)	991	929	868	665	527	485	393	357	393	323	339	347	348	357
New business lending, SMEs	EUR Billion	394	357	263	210	174	146	134	147	165	170	184	175	174	173
Share of new SME lending	% of total new lending	39.76	38.43	30.30	31.58	33.02	30.10	34.10	41.18	41.98	52.63	54.28	50.43	50	48.5
Outstanding short-term loans, SMEs	EUR	379	346	246	196	166	139	126	135	154	153	163	157	156	129
Outstanding long-term loans, SMEs	EUR	15	11	17	14	8	7	9	11	12	17	21	18	17	44
Share of short-term SME lending	% of total SME lending	96.19	96.92	93.54	93.33	95.40	95.21	93.33	92.47	92.77	90.00	88.59	89.71	90.2	74.6
Government loan guarantees, SMEs	EUR Million	5 550	7 700	11 000	10 100	12 000	11 000	13 000	9 100	7 600	6 500	3 110	..	..	..
Government guaranteed loans, SMEs	EUR Million	5 210	7 053	5 906	7 236	7 502	4 974	2 064	938	273	109	42	30	..	..
Direct government loans, SMEs	EUR Million	10 103	12 384	19 916	23 740	26 221	23 599	23 648	22 588	21 481	20 734	20 525	20 601	19 962	29 352
Non-performing loans, total	% of all business loans	..	..	..	5.81	7.84	10.43	13.62	12.51	10.12	9.11	7.79	5.81	4.79	4.51
Interest rate, SMEs	%	5.96	5.51	3.63	3.78	4.95	4.91	4.79	3.86	3.01	2.44	2.15	1.89	1.71	1.71
Interest rate, large firms	%	5.33	4.30	2.16	2.57	3.36	2.61	2.69	1.99	1.97	1.56	1.56	1.69	1.15	1.39
Interest rate spread	% points	0.63	1.21	1.47	1.21	1.59	2.30	2.10	1.87	1.04	0.88	0.59	0.20	0.56	0.32
Collateral, SMEs	% of SMEs needing collateral to obtain bank lending	..	..	..	35.19	34.36	31.45	30.00	31.22	28.24	25.89	26.04	24.05	23.39	20.79
Percentage of SME loan applications	SME loan applications/ total number of SMEs	..	..	38.07	36.25	34.67	31.89	31.49	34.36	33.81	32.80	28.14	28.60	33.87	42.44
Rejection rate	1-(SME loans authorised/ requested)	..	..	22.74	15.87	12.83	18.47	12.85	9.77	7.87	6.95	4.75	5.95	4.38	3.85
Non-bank finance
Venture and growth capital	EUR Million	..	3 336	3 596	3 600	2 675	2 145	1 473	2 247	1 902	1 886	2 446	2 984	4 196	4 008
Venture and growth capital (growth rate)	%, Year-on-year growth rate	..	..	7.79	0.11	-25.69	-19.81	-31.33	52.5	-15.4	-0.8	29.7	22	40.6	-4.4
Other indicators
Payment delays, B2B	Number of days	5	3	13	10	4	8	8	15	12	7	5	2	0
Bankruptcies, SMEs	Number	894	2 550	4 463	4 187	4912.0	6627.0	7517.0	5096	3927	3305	3 310	3 346	3 744	3 394
Bankruptcies, SMEs (growth rate)	%, Year-on-year growth rate	..	185.23	75.02	-6.18	17.32	34.91	13.43	-32.21	-22.94	-15.84	0.15	-1.81	-11.8	-9.32

Source : See table 41.3

SMEs in the national economy

According to the Spanish National Statistics Institute (INE), 99.7% of all non-financial corporations (NFCs) were SMEs in December 2019, employing 62.6% of the business labour force. Of these, 89.1% were micro-enterprises, 9.0% small enterprises and 1.6% medium-sized enterprises (Table 41.2).

Table 41.2. SME distribution in Spain, 2019

	Number of companies	Share of companies	Number of employees	Share of employees
Microenterprise (less than 10 employees)	1169823	89.1%	2018661	19.6%
Of which (without employees)	466638	35.5%	-	-
Small enterprise (from 10 to 49 employees)	118362	9%	2346099	22.8%
Medium enterprise (from 50 to 249 employees)	20871	1.6%	2069714	20.1%
Big enterprise (more than 249 employees)	4062	0.3%	3847110	37.4%
Total	1313118	100%	10281584	100%

Source: Spanish National Statistics Institute, 2021

SME lending

The COVID-19 pandemic has triggered a global health, social and economic crisis unprecedented in modern times. Since its outbreak, the pandemic has caused the largest health crisis in recent history in Spain and has had an vast cost in terms of human lives. Likewise, it has meant an unprecedented disruption to economic activity in our country, across at least three dimensions. First, the vast majority of macroeconomic aggregates experienced a historical deterioration in the first half of 2020. The recovery that took place in the third quarter of last year has only made it possible, for the moment, to correct a part of this initial deterioration. Second, the crisis has affected the different productive sectors, provinces, companies, households and groups of workers in a very asymmetric way. Finally, the disruption can also be seen due to the significant changes it has caused in the behaviour of economic agents, who have tried to adapt to the pandemic and its consequences, in a short space of time (mobility patterns of people, habits of household consumption and provision and organization of work). Economic authorities have also been forced to react very decisively to the challenges posed by the health crisis (in many cases, deploying measures of an unprecedented nature and scope) and to readjust their actions in the face of the changing nature of the health crisis.

In this context, the outbreak of the health crisis in Spain in March 2020, and the introduction of significant restrictions on the mobility of people and the activity of certain sectors caused GDP to contract by 5.4% and 17.8%, in quarter-on-quarter terms, in the first two quarters of last year respectively. Thereafter, GDP began a recovery path thanks to the improvement in the epidemiological situation during the spring and a gradual relaxation of restrictions. As a result of all this, the GDP of the Spanish economy, which contracted by 10.8% in the whole of 2020, was still, in the first quarter of 2021, 9.4% below the level registered at end of 2019.

National authorities in fiscal, monetary, regulatory and prudential policy have had to gradually adjust to the evolution of the pandemic. In this sense, Spain has implemented measures such as the implementation of ERTE1, temporary cessations of activity in the case of self-employed workers, as well as the different lines of public guarantees from the Official Credit Institute (ICO) that were created to favour the granting of credit to companies. In addition, both the ECB and the Eurosystem have introduced measures to provide bank credit in favourable terms to the private sector and to maintain the stability of financial markets

As a result, financing conditions for companies in Spain have remained relatively favourable during this crisis and the cost of new loans has declined to historically low levels.

The macroeconomic projections for the Spanish economy made in September 2021 project an extension of the current recovery phase of the activity registered throughout this year. The average GDP growth rate is expected to grow by 5.9% in 2022 and 2% in 2023. Among the factors on which these favourable prospects are based, the continued support of economic policies, both fiscal and monetary in nature, stands out. The Spanish economy is forecasted to reach the pre-crisis GDP level in 2022.

As shown in Table 43.1, the evolution of the financing of companies has been positive, despite the fall in economic activity and employment. New business lending grew 2.6% during 2020 reaching EUR 357 billion . New SME lending remained stable reaching EUR 173 billion, which represents a slight decrease in the share of this type of companies. This moderately expansive development has been compatible with the process of public aid and financial support granted by the economic and monetary authorities, which has prevented breaking the traditional pro-cyclical behaviour of bank credit.

As a result, the total outstanding business loans has grown by 8.3% to stand at EUR 471 billion , while the SME outstanding business loan experienced a greater increase (10%) to total EUR 241 billion. This evolution has allowed small and medium-sized companies to recover a greater share (51.2%) compared to large companies.

Regarding NPLs, it is worth highlighting the continuation of the process of reducing non-performing loans that began in 2013 and which stands at 4.51% in 2020, which is the lowest level since 2008.

Credit conditions

Throughout 2020 and the first quarters of 2021, favourable financing conditions have been maintained in an environment in which the ECB's monetary policy has continued with a very expansionary tone, driven by the guidelines established on the future path of rates of interest and the duration of the asset purchase programs. In this context, the average interest rates applied to SMEs have remained at a low level (1.71%), which has caused a further decrease in the interest rate spread from 24 basis points (bp) to 32 bp at the end of 2020.

This improvement in financing conditions has also been reflected in a further reduction in the rate of SMEs needing collateral, which stood at 20.8%, which is the lowest level in the period analysed. Along the same lines, it should be noted that the upward trend started in 2017 with an increase in the percentage of SME loan applications to 42.4% in 2020. This evolution is compatible with the reduction of the rejection rate to 3.85% and as revealed by the survey on the access to finance of SMEs in the euro area (SAFE survey from the ECB), and in 2020 the increase is related to the 80% credit guarantee as part of the ICO scheme.

One of the most outstanding aspects of 2020 is that Payment delays, B2B has managed to reduce to zero, with a 2-day drop in the payment period compared to the previous year and the lowest level in the historical series, which could be linked measures against late payment in commercial operations and the implementation of electronic invoicing.

Alternative Sources of SME Financing

The volume of private capital investment in Spain in 2020 reached EUR 4 billion in a total of 765 investments. The sectors that received the largest volume of investment were Communications (28%), IT (25.4%) and Consumer Products (10%). By number of investments, the most important were IT (342 transactions), Medicine/Health (85) and Biotechnology/Genetic Engineering (54).

Other Indicators

The number of bankruptcies in 2020 stood at 3,394, which represents a decrease of 9.3% compared to the previous year. In a context of strong economic recession this figure could have been higher, however the public support mechanisms such as ICO loans and ERTEs certainly mitigated the increase of this indicator.

Government policy response

As already mentioned, in order to reduce the effects of the health crisis and sustain household and business income, in 2020 a sharp increase in public financial support has been granted. In particular, it should be noted that, as shown in Table 1, more than EUR 29 billion in direct government loans were granted to SMEs this year, that is, 47% more than the previous year. In order to mitigate these liquidity risks, the authorities have swiftly implemented economic policies in different areas, both nationally and supranationally, the main lines of which are described below.

In the area of tax policy in Spain, it is worth highlighting the public guarantee programs managed through the ICO. The first, for a maximum amount of 100 billion euros, was aimed at financing the liquidity needs of companies and the self-employed. The main destination of the second, for a maximum of EUR 40 billion, was the financing of investment in fixed assets, although this line also includes among its purposes the coverage of liquidity needs. In these programs, the State assumes up to 80% of the possible losses associated with the loans granted by financial entities, which encourages the supply of credit. As of March 31, 2021, both programs have jointly guaranteed loans for a total of EUR 93.9 billion , which has translated into a total financing of EUR123.6 billion. Likewise, EUR 4 billion of the endowment of the first program was used to guarantee promissory notes issued in the Mercado Alternativo de Renta Fija (MARF), of which a total EUR 1100 million have been used to support the revaluations granted by the Compañía Española de Reafianzamiento, SA (CERSA). Such amount was reinforced through the second guarantee program. In addition, compared to the rest of the bank financing, the loans under the guarantee program present advantageous conditions both in terms of the interest rate and the term of the operation. In November 2020, the maximum maturity term of the loans granted has been extended to eight years (from the initial five in the guarantees granted through the first line). Likewise, in March 2021, the term for granting guarantees was extended until December 31, 2021 and the term of the bankruptcy moratorium was extended until the end of the year. This measure aimed to prevent companies that continue to experiment temporary financial difficulties from having to submit to bankruptcy and therefore doomed to their liquidation.

The Government approved in July 2020 the rule that creates the Fund to Support the Solvency of Strategic Companies (hereinafter, the Fund or FASEE). The Fund is attached to the Ministry of Finance and is managed by the Sociedad Estatal de Participaciones Industriales (SEPI). This Fund is initially endowed with a total of EUR 10 billion. Its objective is to provide temporary public support to strengthen the solvency of non-financial companies affected by the Covid-19 pandemic, which are considered strategic for the national or regional productive fabric. The procedure for processing the fund includes a rigorous and exhaustive analysis of all the information provided by the requesting company and includes the performance of "due diligence", the final design of the Viability Plan, the negotiation of its application and the agreement on the aid scheme.

There are two temporary public support instruments to reinforce business solvency: a) participating loans, convertible debt, the subscription of shares or social participations and any other capital instrument; b) in a complementary manner, any other credit facilities, such as the granting of loans or the subscription of privileged, ordinary or subordinated, secured or unsecured debt.

To date, EUR 1,521.83 million have been granted (15.2% of the total budgeted) that have been distributed in eleven operations.

Figure 41.1. Trends in SME and entrepreneurship finance in Spain

Source: See table 41.3

Statlink

Table 41.3. Definitions and sources of indicators for Spain’s scoreboard

Indicator	Definition	Source
Debt
Outstanding business loans, SMEs	Outstanding amounts of loans granted to SME residents in Spain. Solo propietors are not included. SME according the European Recommendation 2003/361/CE.	Banco de España
Outstanding business loans, total	Outstanding amounts of loans granted to non-financial corporations residents in Spain. Solo propietors are not included.	Banco de España
New business lending, total	Amount of new euro-denominated loans granted in the reference period to non-financial corporations (NFCs) resident in the euro area . Overdrafts are excluded. From June 2010, credit lines and credit card are excluded.	Banco de España
New business lending, SMEs	Amount of new euro-denominated loans granted in the reference period to non-financial corporations (NFCs) resident in the euro area for amounts below EUR 1 million. Overdrafts are excluded. From June 2010, credit lines and credit card are excluded.	Banco de España
Outstanding short-term loans, SMEs	Amounts of new euro-denominated loans granted in the reference period to NFCs resident in the euro area for amounts below EUR 1 million with terms of one year or less. The term in this case refers to the initial rate fixation and not to the loan term. Overdrafts are excluded. From June 2010, credit lines and credit cards are excluded.	Banco de España
Outstanding long-term loans, SMEs	Amounts of new euro-denominated loans granted in the reference period to NFCs resident in the euro area for amounts below EUR 1 million with terms of more than 1 year. The term in this case refers to the initial rate fixation and not to the loan term. Overdrafts are excluded. From June 2010, credit lines and credit cards are excluded.	Banco de España
Government loan guarantees, SMEs	Ceiling on Central Government guarantees approved by Law includes only guarantees for the securitization funds. Stocks	Dirección General del Tesoro y Política Financiera
Government guaranteed loans, SMEs	Proxy: Guarantees granted by general government for SME enterprises; includes only guarantees for the securitization funds. Stocks.	Dirección General del Tesoro y Política Financiera
Direct government loans, SMEs	Financial assets of general government in the Financial Accounts of the Spanish Economy: loans to total NFCs. stocks.	Dirección General del Tesoro y Política Financiera e Intervención General de la Administración del Estado
Interest rate, SMEs	Interest rates applied to new euro-denominated loans granted in the reference period to NFCs resident in the euro area for amounts below EUR 1 million with terms of one year or less. The term in this case refers to the initial rate fixation and not to the loan term.	Banco de España
Interest rate, large firms	Interest rates applied to new euro-denominated loans granted in the reference period to NFCs resident in the euro area for amounts over EUR 1 million with terms of one year or less. The term in this case refers to the initial rate fixation and not to the loan term.	Banco de España
Interest rate spread	Interest rates applied to new euro-denominated loans granted in the reference period to non-financial corporations (NFCs) resident in the euro area for amounts below and above EUR 1 million with terms of one year or less. The term in this case refers to the initial rate fixation and not to the loan term. Interest rates SME minus interest rate large firms.	Banco de España
Collateral, SMEs	Proxy: percentage of loans backed by real state guarantees. Estimate based in outstanding amounts. Total firms.	Banco de España
Percentage of SME loan applications	Financing applied, Bank loan - Survey on the Access to Finance of SMEs	European Central Bank
Rejection rate	SME loans rejected over SME loans applied- Survey on the Access to Finance of SMEs	European Central Bank
Non-bank finance
Venture and growth capital	Actual amounts invested in SMEs: seed ,start up and expansion stage (excludes buyouts, turnarounds, replacements). SME defined as firms with less than 250 employees.	Comisión Nacional del Mercado de Valores
Other indicators
Payment delays, B2B	Average delay in days for B2B. SME enterprises which have been selected following a more literal application of the European Recommendation 2003/361/CE (in particular, the SMEs belonging to a group have been eliminated in the calculations). It has been calculated, subtracting the accounting payment period, to the legal maximum average payment period prescribed in the law.	Banco de España
Bankruptcies, SMEs	Number of SMEs enterprises, which have been selected following a more literal application of the European Recommendation 2003/361/CE (in particular, the SMEs belonging to a group have been eliminated in the calculations), ruled bankrupt.	Banco de España obtained from Mercantile Register Information

Note

← 1.  Expediente de Regulación Temporal de Empleo (ERTE) is a procedure by which a company in an exceptional situation seeks to obtain authorization to fire workers, suspend work contracts or reduce working hours temporarily, when they go through technical or organizational difficulties that put the continuity of the company at risk.