Specific inputs of Mutual Guarantee Societies for the SME and for the Banker.

-In terms of positioning, Mutual Guarantee Societies are situated midway between the business world and the financial system.

From the viewpoint "SME", Garantee Societies are looking for partnerships with the entrepreneurs themselves or with Business Federations or Chambers of Commerce. They are especially aimed at the self employed and micro-enterprises, start-ups ( creation , take-over, family succession), rapidly-expanding companies. All economic sectors are concerned.

• They provide companies with access to finance, encouraging their creation or expansion; by so doing, they contribute to the creation of self-employed or salaried jobs.
• They enhance the company's intangible and qualitative elements (experience, training, skills, business and technical value of the project, ability to fulfil the business plan etc.) in the risk assessment of loan applications.
• They enrich the risk assessment with field information about the sector, its technological and market development, competition etc.
• They bring together the language of the enterprise with financial jargon, so that there is a better understanding between parties.
• They foster initiative and entrepreneurship through the positive assistance of a professional environment.
• They seek out the appropriate financial structure for the company and attractive loan terms
• They provide the enterprise with advice and supervision in terms of financial management

From the point of view of the banking system, Garantee Societies tend to focus more on banks specialising in the SME sector and on the European financial institutions.

• They take the time to construct a detailed financial file, at a time when the drive for efficiency leads banks to use simple and standard methods.
• They "externalise" the counterparty risk outside the bank. The premium (generally modest, about 1% / year) is paid by the company offset against his access to better finance.
• They use more qualitative criteria in the credit application which completes the more financially-oriented analysis of the bank loan.
• When the guarantee bodies are themselves credit institutions or public agencies, they tend to reduce the requirement of investment capital in terms of the bank's Risk Asset Ratio This provides leverage for the expansion of the bank's business.

An Overview of Future Developments :click here.

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