Spanish SMEs face challenges and opportunities in seeking financing in 2023.

Financing has become a crucial issue for small and medium-sized enterprises (SMEs) in Spain in the current context. In 2023, nearly two million of these companies, which represent 54.2% of the total in the country, were forced to turn to external resources to maintain their operations or expand their businesses. This phenomenon highlights the dependence of SMEs on external financing, particularly in an increasingly challenging economic environment. A recent report from the Spanish Confederation of Guarantee Societies (SGR-CESGAR) reveals that 73.9% of SMEs seeking financing in 2023 opted to rely on external funds, with bank loans being the most popular option. Access to capital is essential, not only to cover working capital needs but also to invest in technology, expand the workforce, or launch new products and services. However, the path to financing is not without obstacles. One of the biggest challenges facing SMEs is the increase in interest rates, a phenomenon that has significantly influenced access to credit. According to KPMG's "II Report on SMEs and Self-Employed in Spain," 34% of small businesses have had to modify their investment decisions due to these increases, which were initially driven by the pandemic and later exacerbated by geopolitical factors such as the war in Ukraine. Although the latest report from Cepyme indicates that interest rates have begun to decline, the recovery of access to financing remains slow. The need for financing among SMEs has always been high. In 2023, more than half of them required external funds, representing a slight decrease compared to the previous year, but still significantly higher than pre-pandemic levels. The most recent report estimates that an additional injection of €15 billion is needed for credit to SMEs to return to pre-crisis levels. Among the solutions being explored to improve access to financing, collaboration between the public and private sectors stands out. Tools such as the ICO credit lines and loans, which offer favorable conditions and long terms, are designed to help SMEs overcome their financial difficulties. Additionally, government grants and aid are valuable alternatives that companies can take advantage of without the obligation of repayment. Credit lines have also begun to gain popularity among SMEs that require flexibility in accessing capital. Unlike traditional loans, where a fixed amount is received, credit lines allow companies to use only the money they need, paying interest only on the utilized capital. However, these products often come with higher interest rates, posing a dilemma for many SMEs seeking to balance cost and flexibility. The role of banks is fundamental in this scenario, not only as intermediaries in granting loans but also in their ability to advise SMEs on the best financing options available. Elisa Sánchez, the Director of Business Financing at Banco Sabadell, emphasizes the importance of this mediation, especially in the context of ICO lines, which will channel a significant portion of the funds allocated to SMEs. Most SMEs seeking financing prioritize covering their working capital needs, highlighting the pressure they face to meet short-term obligations. Increasing investment in productive equipment has also gained relevance, reflecting a trend towards modernization and improving operational efficiency. The landscape is further complemented by the growing importance of digitalization and sustainability. A significant percentage of SMEs seeking financing in 2023 did so to invest in these areas, indicating a shift in business mentality towards more innovative and responsible models. This push towards digitalization not only responds to an immediate need but can also be a key factor in improving their competitiveness and long-term resilience. In conclusion, financing is a fundamental pillar for the future of SMEs in Spain. While the challenges are significant, the opportunities to obtain funds and improve the financial situation of these companies are also on the rise. With the right support and well-defined strategies, SMEs can not only survive but thrive in an ever-evolving economic environment.