The debt burden of French companies was at record levels even before the coronavirus outbreak and many increased their borrowing to maintain operations as cash flow dwindled during the crisis.
The state has already offered to guarantee up to 300 billion euros in bank loans, but the dismal state of the balance sheets of some small businesses has led to calls from the central bank and economists for support in the form of equity to avoid a wave of bankruptcies.
The Mayor told the business newspaper Les Echos that the state would guarantee 3 billion euros in loans to SMEs with a minimum duration of seven years, helping them to raise 10 to 15 billion euros.
The loans would be accounted for as equity on the books of the companies, which means that they should not add to their debt burden, and they would not confer corporate governance rights as equity usually does.
“These long-term loans are essential for SMEs whose loans are too high, slowing down their development and investments,” said Le Maire.
He added that discussions were still underway with banks about how much businesses would be charged for the loans and said lenders would decide who would get them to ensure they were reaching out to businesses with viable businesses.
The Mayor also said the banks had agreed to charge between 1 and 3% depending on the loan term after the first year for loans under the € 300 billion guarantee program. In the first year, SMEs pay only 0.25% under this program and large companies pay 0.50%.
(Reporting by Leigh Thomas; Editing by Kirsten Donovan)