France's Financial Aid To Benefit More SMEs

by Ulrika Lomas, Tax-News.com, Brussels

14 October 2008

Hervé Novelli, the French secretary of state responsible for small and medium sized enterprises (SMEs), has enlarged the number of small businesses due to qualify for the EUR9bn loan package, to be financed by the livret d’épargne populaire or LEP.

Initial financial measures, drawn up to protect SMEs in the face of the current global financial difficulties, were unveiled by the French government at the beginning of the month.

A revision of the original financial aid package, however, has seen the amount of aid increased by EUR1bn to EUR9bn and extended to benefit SMEs with up to 5,000 employees, previously earmarked for those with fewer than 250 employees.

From October 15, middle-sized businesses (entreprises de taille moyenne or ETIs), will also benefit from the revised, increased loans.

The government support package also includes three key initiatives drawn up with Oséo, the public bank working to support innovation and growth of SMEs. These additional support measures include:

• A 50% increase in Oséo’s loan capacity.
• An increase in the number of guarantees granted to SMEs by Oséo, amounting to EUR1bn additional bank loans every year.
• A revival of the RSF (Renforcement de la Structure financière) guarantee funds.

Oséo has outlined its commitment to facilitate the conversion of short, medium or long term loans and, in so doing, respond to the needs of small businesses. SMEs will be able to surrender their claims to Oséo who will advance the necessary funds. In addition to this, the tax credit available for research may be transformed into a state debt and accessed in advance in the form of a loan provided by the banks.

The government’s precautionary initiatives come at a time when 57% of SMEs expressed their current situation as “very fragile,” 17% as “fragile” (including three quarters of technology-based SMEs) and only 26% described their position as “solid,” according to a recent survey conducted by the Comité Richelieu. Critically, 51% of businesses highlighted their dissatisfaction with their banks, fearing that they were failing to respond to credit demands.

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