SMEs financing and financing information sheet

15/02/2018

If you have an SME or you are self-employed and you hold either a line of credit, guarantees, a bank discount or factoring contract, or even several of them, you may be interested in knowing which are your rights towards a credit institution (banks, savings banks, credit unions or the Spanish Official Credit Institute), or specialized credit institutions.

First of all, if your bank decides not to extend or cancel your financing, it won’t be able to do it overnight. You must be notified with at least three months in advance with a method that allows issuing a return receipt. You therefore count with a period of time to seek alternative financing sources with other banks in order to avoid possible liquidity problems.

The right to be notified three months in advance not only applies to credit cancellation scenarios, but also for cases in which your bank intends to reduce your total financing by a 35% or more. Therefore, beware of new contracts or extensions with reduced amounts that your bank may offer: it may be cutting off the financing granted without informing you in advance.

However, you must also be aware of certain exemptions that apply to this rule. Financial institutions may reduce or cancel an SME’s financing without prior notice in the following cases:

• declaration of insolvency proceedings;
• customers’ non-compliance with contract obligations;
• objective reasons based on important and unexpected deterioration of financial conditions.

On the other hand, financial institutions are obliged to draw up a report called “financial information-SME” upon request from SMEs or self-employed individuals. It’s a very comprehensive report which sums up the financial situation, level of indebtedness and customers’ payment records. Additionally, this report must also contain a risk rating, this is, the score obtained from assessing the ability to pay and on which banks base their decisions whether to grant or not the financing requested. The “financial information-SME” report may be useful to gain easier access to other financing sources.

This report may come at a cost, which isn’t fixed and may vary depending on each financial institution, so please inform yourself beforehand.

Finally, if your bank decides to cancel or reduce your financing by a 35% or more, it is obliged to provide you with the “financial information-SME” report free of charge and within a maximum of ten working days from the notification date, even if you haven’t requested it.