Recently it was the International Day of SMEs, a good trigger to understand a little of its dynamics and how the Capital Market can become a key tool for its development.
When we talk about small and medium businesseswe are certainly talking about a dynamic sector of the economyalthough severely affected by the economic reality of recent years. Therefore, it is within this framework that it becomes essential to analyze the different financing alternatives that may be available to them.
In that sense, beyond traditional bank loans and rate subsidy opportunities, there are mechanisms that are always good to know -even when later each one will see which one applies to the reality of their company-.
The premise, as we always say, is compare rates. This means not accepting as valid the first alternative – which is usually the discount of securities in the bank – where the company has an account or in a financial institution. The capital market is complementary to the banking system, and allows financing many times at lower rates than those offered by banks. And in addition, it has very simple alternatives. On the one hand, the segments where we can negotiate the different instruments available:
Supported Segment:
Qualification in a Mutual Guarantee Society (SGR) is required. The purpose of an SGR is to facilitate access to credit. SMEs by issuing liquid guarantees. In other words, the SGR will not provide a loan, but rather a guarantee to present to a creditor (bank or capital market). The creditor knows that, beyond the credit quality of the SME, in the event of non-compliance, the SGR is responsible.
Guaranteed Segment:
Similar to a stock guarantee, where the SME (or its shareholder) places financial assets as collateral in a trust on the Argentine Securities Market (MAV), enabling a line equivalent to the value of the assets less a valuation (depending on the type of asset involved).
Within this line you can discount third-party checks or your own checks (a Deferred Payment Check is issued to the order of the issuer itself, deferring the period needed).
Non-Guaranteed Segment:
Here, the investor buys issuer risk. It is less liquid,but there are investors willing to bid for checks. Here it is recommended to consult the ALyC where the SME has an account if there is an investor for the check who wants to deduct.
Within these segments we can negotiate different products (depending on the term and currency)
Deferred Payment Checks (CPD):
This is the most commonly used instrument – especially since the existence of the Echeq, which has streamlined the operation. They can be third-party checks or own checks (the issuer issues a check to his own order deferred for the period needed for financing),
Stock Promissory Notes:
It can be in pesos, tied to the exchange rate (dollar linked) or Hard Dollar (recently authorized), and has become a financing alternative for export companies.
It is similar to a check, but can be deferred for more than 365 days (in May, the maximum limit of three years was eliminated). It can be issued in pesos or dollars. It can also be guaranteed by a SGR, which improves financing conditions for SMEs, or it can also be negotiated in the guaranteed and non-guaranteed segments.
Electronic Credit Invoices (FCE):
This financing tool allows an SME supplier to a large company (within a list published by the AFIP) to be required to issue an FCE. Within the next 21 days, the large paying company must:
1. Authorize the transfer of the FCE for negotiation (if you choose this alternative you have a tax benefit);
2. Cancel the obligation by issuing a check or transfer;
3. Do nothing. In the latter case, after 21 days, there is a tacit acceptance that allows the SME to transfer the FCE for trading.
Specifically, through the AFIP portal, the SME transfers the FCE to the AlyC where it has its client account in order to negotiate it.
Negotiable Obligations (ON):
This alternative requires the endorsement of an SGR. There is a Simplified regimen where all the requirements for the public offer (presentation of quarterly balance sheets, risk rating, etc.) fall on the SGR, with the SMEs only having to present their annual balance sheet in a timely manner. This is debt issued by the company, guaranteed by the SGR. This allows us to extend deadlines and be able to finance future projects.
In conclusion, there is a universe of options for companies and within the capital market, which deserves to be known. This is precisely why more and more SMEs are joining the market and the opportunities it offers for the financing of productive projects and growth of SMEs, a sector that at PPI we see as a key driver of the country.
Corporate Director of PPI.
Source: Ambito
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