To help address the solvency risk affecting SMEs during and after the COVID-19 pandemic, the Commission is organising a workshop to exchange good practices on measures and incentives taken by several EU countries to support viable companies.
While bankruptcies among SMEs have not increased much during the pandemic, this is likely due to various temporary government support measures and moratoria on insolvencies that prevent companies from going bankrupt. Many EU countries adopted such measures based on the Commission’s State Aid Temporary Framework to support the economy in the COVID-19 outbreak. However, issues could still arise, as a substantial number of companies may only have limited cash buffers and may need to rely on further government intervention. Financial pressure may amplify, with insolvencies expected to rise alongside the scaling down of loan schemes, moratoria, tax holidays and other forms of relief.
As most EU countries focus their support schemes on debt solutions, many SMEs are now reaching the limit of their sustainable debt capacity. Against this over-leveraging, the need for recapitalisation is most acute for smaller SMEs with even less access to institutional funding than their bigger peers. Meeting this gap is a challenge at both EU and national level. One major challenge is to design policies that can reduce solvency risk for viable companies while avoiding the 'zombification' of the economy (i.e. financing non-viable companies).
As announced in our recently launched Industrial Strategy, an exchange of good practices on national measures to aid recapitalisation, debt conversion, and SME balance sheet strengthening takes place today among national financial experts nominated by the SME Envoys Network.
- Publication date
- 28 September 2021