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Greece scrambles to subsidize small business loans

The basic plan of the government foresees that a program similar to the "Bridge" program will be created for small businesses and professionals.

The Greek government is examining a plan to temporarily subsidize loan payments made by small businesses to avoid the debt from turning sour after the end of the loan moratorium, sources told Business Daily, amidst fears that the Finance Ministry’s basic plan to help out with payments via the Gefira (Bridge) program will be delayed.

The goal is, sources add, to find a formula to start as soon as possible the flow of grants on loan installments to very small companies and professionals, until the basic plan for the "Bridge" type program is activated.

The basic plan of the government foresees that a program similar to the "Bridge" program will be created for small businesses and professionals. In line with the "Bridge" program for mortgages, the state will offer grants for a period of nine months, with the main goal of providing support to entrepreneurs for the first period after the end of the suspension of payments period.

However, this plan is expected to be activated, at best, in March, without ruling out further delays. It will first need to be approved by the European Institutions, while it will also have to go through the European Commission's Directorate-General for Competition on whether it is compatible with state aid rules.

In the meantime, however, loan payments on a large number of business loans reaching almost 10 billion euros that have been suspended are emerging from the temporary freeze, while the economy remains under enormous pressure due to the pandemic.

The problem is extremely serious, not only for the small entrepreneurs, but also for the banking system, which is in danger of seeing a larger than expected rise in the number of NPLs emerging from the loan moratorium. So far, banking officials estimate that only a quarter of the suspended loans totaling more than 20 billion euros will turn bad, but the conditions created by the second lockdown, combined with a possible delay in the program " Bridge "for business loans is very likely to increase new NPLs well above initial forecasts.

It is worth noting that for the suspended loans, the banks are under constant pressure from the ECB's Single Supervisory Mechanism, which has requested that the financial situation of each borrower be closely monitored, that the credit risks be constantly assessed and that the banks form the appropriate provisions as soon as the loan period is suspended.

This obligation, combined with the intensifying suffocation of the market caused by the second lockdown in smaller businesses and professionals, makes for an explosive cocktail for the banking system and the pressure can be eased to some extent, only a transitional program for loan payment subsidies is quickly introduced. Essentially, you need a "Bridge" mini-program, possibly lasting three months, which will ... bridge the period until the regular program starts for small business loans.

The basic 9-month installment subsidy program is designed to adequately meet the needs of thousands of small businesses and professionals, with a turnover of less than one million euros.

The grant will cover small loans, up to 250,000 euros, even without collateral, provided the company or professional has been affected by the pandemic.

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