Key financing: SMEs in Spain struggle for their survival and growth.

Financing has become a crucial element for the development and growth of small and medium-sized enterprises (SMEs) in Spain. According to the recent "XIII Report on SME Financing in Spain," prepared by the Spanish Confederation of Guarantee Societies (SGR-CESGAR), nearly two million of these companies, constituting 54.2% of the total, sought external financing in 2023. This phenomenon underscores an unavoidable reality: access to financial resources is essential for the survival and competitiveness of SMEs. The financial landscape for these companies has been profoundly affected by the COVID-19 health crisis, which marked a turning point in their financing needs. Although the percentage of SMEs requiring external funds in 2023 decreased compared to 2022 (from 80.4% to 73.9%), it remains significantly above pre-pandemic levels, when only 34.8% of SMEs needed financing. This shift highlights that recovery is slow, and according to the report from the Cepyme Studies Service, around €15 billion needs to be injected to return to pre-crisis credit levels. The question of how this financing is allocated is equally important. SMEs use it to cover various needs, from working capital to investments in technology, staff expansions, and new product launches. However, most of these companies still rely on bank loans, which represent 62% of external financing sources, despite interest rates and the lack of guarantees being the main obstacles they face. More than 70% of SMEs indicate that the increase in interest rates, which reached a peak in recent years, has influenced their decisions. The financial environment has begun to change, offering hopes for SMEs. In the third quarter of 2024, the interest rate for new loans to small businesses dropped to 4.81%, marking the first decline since June 2022. Projections for 2025 are optimistic, with expectations of a significant improvement in financing conditions. José María Torres, president of the National Confederation of SMEs (Conpymes), advises SMEs to carefully assess their repayment capacity and capital needs before applying for loans. Credit lines are emerging as a viable alternative to traditional loans, providing SMEs with flexibility in accessing financing. Instead of receiving a fixed amount, companies can withdraw funds as needed, allowing them to pay only for the capital utilized. However, the interest rates associated with these lines are often higher, presenting an additional challenge. Collaboration between the public and private sectors also plays a key role in financing SMEs. Initiatives such as the ICO (Official Credit Institute) credit lines offer favorable conditions for accessing capital, with banks acting as intermediaries in channeling these funds. The ICO Recovery and Resilience Mechanism (MRR) line is an example of how Next Generation Funds are being used to support companies in their recovery. Elisa Sánchez, director of Business Financing at Banco Sabadell, emphasizes the importance of banking mediation in managing these funds, highlighting the commitment of financial institutions to reach as many SMEs as possible. The need for financing for working capital remains the primary reason for seeking economic assistance, reflecting the financial pressure many companies face in an increasingly uncertain environment. Additionally, digitalization and sustainability are becoming priority areas for SMEs seeking financing. Some 29.3% of companies that requested funds in 2023 did so with the aim of investing in digital technology and sustainable practices. This trend not only responds to the need to adapt to a changing market but also reflects a growing commitment to innovation and social responsibility. In summary, Spanish SMEs find themselves at a crossroads where financing stands out as a determining factor for their future. As credit access conditions improve, it is crucial for companies to be prepared to seize these opportunities. The combination of appropriate advice, financial planning, and a strategic vision can make the difference between stagnation and growth in an increasingly challenging business landscape.