The companies are hoarding liquidity due to the fear generated by the crisis while lengthening their payment terms, which puts the payment chain and the solvency of other companies in trouble.
In the early stages of the emergence of the coronavirus in Spain, in March, there was 122.000 companies that closed due to lack of activity, a figure four times higher than the worst month of the crisis in 2008. But the worst could be yet to come, since there are more than half a million companies that could go bankrupt in the coming months due to delays in payments by their suppliers, as denounced by the Multisectoral Platform against Late Payment (PMcM), that brings together a million companies. In fact, the president of the Platform, Antoni Cañete, that will present these data today in the Commission for the Social and Economic Reconstruction of Congress, complaint that although liquidity lines have been provided for many companies, most have chosen to keep a good part of this money just in case, delaying payments to your suppliers, which causes the solvency of the system as a whole to sink and jeopardizes the survival of many companies.
According to a PMcM study, he 70% of companies are observing longer payment terms since the coronavirus crisis began and, although normally it is the large companies that delay the most, now it is the SMEs that most extend the payment of their invoices beyond the due date, which would reveal the lack of liquidity. “Si no se pone remedio a la ruptura de la cadena de pagos, there will be a large number of bankruptcies, especially among small and medium-sized companies and the self-employed, they are two monthly payments from not holding any more. Between 15% and the 20% of companies could disappear, y la mayoría de las quiebras se producirán por falta de liquidez por la ruptura de los flujos monetarios”, stresses Cañete. This is, between 500.000 and 600.000 Business.
The big problem is that the State has worried about injecting money into companies, but not to ensure that that money is used to pay the outstanding bills. Till the date, the State has guaranteed financing amounting to 65.000 million euros to companies and freelancers, placing companies in the tourism and leisure sector among the main beneficiaries. By regions, most of the operations have taken place in Catalonia, Andalusia and Madrid. Nevertheless, this does not solve the problem. “Las empresas se están proveyendo de financiación, but the panic and the non-obligation to make the payments makes them keep it to themselves, what is breaking the payment chains and damaging the system as a whole, ahí es donde está realmente el drama y nadie está velando porque eso no se produzca”, Cañete points out, which blames this low compliance on the fact that the Official Credit Institute (ICO) delegate this responsibility to the banks, when it is the Administration who should take care of it, ya que la Agencia Tributaria y el Ejecutivo “disponen de información sobre el del 90% invoices in Spain, they know when they are issued, cuándo se pagan y cuándo se deberían haber pagado”, underlines.
A new virus
And what is the impact of this lengthening on payments? “Esto es como una expansión de un virus, For every invoice that is not paid, three or four more invoices are endangered., y eso al final genera un flujo concatenado de impagos que lleva al cierre de las empresas”, Cañete points out. Besides, adds that the problem will increase next year, since now ICO loans have no interest, but in 2021 “las empresas van a tener problemas de tesorería y van a tener que hacer frente a estos pagos, cuyo tipo medio está al 2,5%”, which may be an added problem. And that can mean that the way out of the crisis is much slower, as several organizations have warned, since if there are no companies to respond to the demand when it recovers, demand will go to other countries. Thus, the PMcM proposes several recipes focused on increasing liquidity in the hands of companies and forcing them to maintain the payment chain. Between them, they propose to force the Administration to pay and the pending invoices that have exceeded the legal term (near 8.500 millions of euros), that a tax credit compensation system be implemented between the State and companies or release part of the 12.000 million euros of remnant that the municipalities have withheld.
A HIGH BUSINESS DEBT
The lengthening of payment terms is not new, since it was coming it was also produced the last two years, despite the economic recovery, according to PMcM. In fact, the average payment terms of the private sector were 73 days last year, 13 more than legally allowed, while the public sector paid its invoices to 70 days, more than double what is allowed. AND, even more troubling, he 3,1% of the bills were left unpaid, a figure that shows a notable rise from the 2,3% registered three years ago and which is the highest figure since 2015. Besides, this situation coincides with a very vulnerable financial position among the business fabric, according to Credit and Surety, since the indebtedness of Spanish companies is equivalent to two thirds of their assets, a figure that shoots up among micro-SMEs, since this ratio reaches the 80,5% balance sheet in companies between 2 and 5 employees.
Source: Expansion.- 08/06/20.