Spanish companies badly hit by bank credit drought in 2010

One in four companies in Spain that sought a bank loan in 2010 failed to obtain it, according to a survey by the National Statistics Institute (INE) published on Thursday (26 May).

The survey, part of a European Union wide study of companies’ access to credit, found that 38% of non-financial companies in Spain sought financing from a bank in 2010 and 25.2% were unable to obtain the hoped-for credit.
By comparison, 80.3% of companies that sought a bank loan in 2007 were successful and less than 10% failed in the attempt.

The survey was designed to assess the difficulties faced by companies in obtaining fresh credit. Some 3,000 construction, industrial and non-financial services companies were polled for the survey.

More than 41% of constuction companies, 39% of industrial companies and just under 36% of service companies sought bank loans in 2010.

While the number of companies seeking funding remained roughly the same as in previous years, those reporting that they were not able to obtain any credit rose by more than 15%.

Only 50.6% of companies surveyed said they were successful in obtaining credit from banks in 2010, compared with 80.3% in 2007.

The construction sector was the most affected by the downturn, though all sectors suffered from the decline in lending, INE said.

The decline was due mainly to the companies’ failure to provide adequate guarantees and to doubts about their solvency, INE said, though the companies themselves blamed high interest rates and “unacceptable” conditions imposed by the banks.

A majority of companies said the banks’ willingness to provide credit had worsened since 2007 and that the cost of funding had risen while their own financial position had deteriorated.

Companies said the economic uncertainty, the fall in demand and price competition were likely to be major factors limiting their growth over the next couple of years. One in four companies believes that future growth will suffer from insufficient access to credit.

The companies surveyed were small and medium size with up to 250 employees in 2005 and at least 10 employees in 2010.

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