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Over the last few months we have seen that SMEs are struggling to fund their cash requirements.

The situation turns out to be somewhat paradoxical. On one hand, business leaders complain that their banks are too often absent. On the other, banks say they receive few applications for funding from SMEs and VSEs.

What is true is that SMEs lack both the cash to fund their operations and equity. However, banks’ offers are mainly investment orientated.

The question arises about the appropriateness of the solutions proposed by banks as a result of the constraints imposed by Basel III and business needs. We have for example noted that the well-known overdraft is increasingly being replaced today by factoring. Except that for some companies, the cost of factoring is higher than a bank overdraft would be.

The result is that today VSEs and SMEs are looking to fill the cash gap. And refocusing on their receivables is not always easy because in the current economic environment, they rarely issue reminders about outstanding invoices to their customers for fear of losing their markets.

The pre-finance tax credit for competitiveness and employment was a breath of fresh air: on 20 September 2013, over 10,000 pre-financing applications were submitted to BPIfrance for a total amount of around 920 million euros and requests for small amounts, that is to say less than 25,000 euros, represent a significant and growing proportion of the applications being handled.

In addition, we are witnessing the development of “business angels” and “crowdfunding,” which are two trendy forms of funding but which are not enough to offset the needs of SMEs.

Companies must now seduce their bankers in order to obtain funding.

Denis Le Bossé,
Chairman of Cabinet ARC
December 2014