Small business loans

Small businesses and the self-employed often turn to the banks for finance.

To help small businesses (SMEs) and the self-employed obtain finance by improving the information available about their financial situation and credit rating a “SME Financial Information” (Información Financiera-PYME) document has been introduced. The aim is to make it easier for small businesses to find alternative funding sources and offers of finance best suited to their needs by establishing their credit rating in advance.

In the same vein, if a bank decides to cancel short-term finance supporting a small business’s working capital or general activity or reduce it by 35% or more, it must:   

  • Give customers three months’ advance notice of the decision by any reliable means so that they can either seek new financing sources or adjust their cash management.   
  • Deliver the SME Financial Information document with information on the borrower’s financial situation, payment history and credit rating, within ten days of giving notice.
  • Small businesses are entitled to their SME Financial Information document at any time without conditions on request. The aim is to build trust among potential lenders and investors, and the current lender is required provide this document within 15 days of the request.

These obligations are not applicable to short-term loans that are terminated or reduced by mutual agreement, cases when the borrowers are legally insolvent or have failed to meet their obligations, or when the debtor’s financial situation unexpectedly worsens, making prior notification impossible.

The SME Financial Information document has been designed to contain reliable and comparable information based on the monthly reports that credit institutions submit to the Banco de España, data forwarded to solvency and credit services companies, credit records, statements of transactions over the past year in loan or credit contracts, and the credit rating.

Risk rating methods are based on the information contained in banks’ records. Thus, as well as information on customers’ financial situation, information arising from the bank’s personal and contractual relationships with customers and any other information about them and their businesses will be taken into account.

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