EUROPE’S middle-sized firms face a credit crunch of their own over the next five years as banks cut back on corporate lending and governments focus help on the smallest businesses, Standard and Poor’s warned yesterday.
The firms need funding of up to €3.5 trillion (£3 trillion) by 2018, the ratings agency forecasts, at a time when troubled banks are cutting lending and facing tougher regulation.
Around €2.7 trillion comes in the form of refinancing existing debt, while the businesses need another €800bn to support capital investment and expansion plans up to 2018.
If new developments like bond trading platforms specialising in mid-market debt could contribute five per cent to the financing of these firms, it could provide a €35bn boost to the borrowers.
“European businesses have traditionally relied on bank funding, but deleveraging and tightening regulation are creating a scarcity of finance for European companies, and the problem is particularly acute for midsize businesses,” said Alexandra Dimitrijevic from Standard & Poor’s. “While larger corporates have easier access to finance and much smaller companies are the focus of a variety of policy proposals, midsize businesses appear to be falling into the gap between them.”
Standard and Poor’s is launching a benchmark tracking credit conditions for businesses with revenues below €1.5bn and debts below €500m.