The challenge of financing SMEs is at the heart of the reflections of the various financial actors, in particular that of banks, first relays of the granting of credit, because to oxygenate the SMEs is the first necessity for a country which counted in 2011 more than 3 million, or 99.8% of companies and 48.7% of salaried employment.
Yet despite a CAC 40 at the highest for years and insurance, investment funds concentrating fantastic liquidity levels, a derisory money cost by a sustained action of central banks, trends show, especially across a study by the Banque de France, an increase in short-term credit refusal rates (30% vs. 10% in the long term).
This raises with increasing acuteness the question of alternative financing solutions such as factoring or the mobilization of circulating assets. The curve of entrepreneurs’ morale obviously follows closely these tightening of the financing of their exploitation.
In addition, it appears that the trend towards “banking disintermediation” mainly concerns medium-sized companies, for various reasons that are mainly related to a good understanding of risks. And recent French history has taught us that, despite the relevance of innovations in bank disintermediation, the credit market showed needs, but ultimately little support for innovative players, as the recent liquidation of ISODEV cruelly demonstrates.
Inter-company credit is still their main source of financing, since it represented an end-2011 amount of 605 billion euros, five times higher than the stock of short-term loans.
New innovative solutions appear, such as the development of crowdfunding or state initiatives through structures such as the BPI, which alone on its balance sheet in 2013 more than 50 billion euros. Insurers are not left behind, bringing the bulk of households’ financial wealth. The question arises as to the destination of the investment of the amounts collected, the figure of 2% of investments in SME securities was even reached for a brief moment before it came down due to normative constraints such as Solvency. II.
Whatever the way in which the fundamental subject of SME financing is addressed, the eternal question of risk assessment, anticipation and monitoring resurfaces.
Whatever the future trends, each vehicle will necessarily pose the eternal question of analyzing risk profiles. Here again, new solutions emerge alongside the innovation of financing techniques. Some accumulate the most diverse information in databases, capable of generating statistics of all kinds, modeled on business valuation models, reinforced by ratios from published balance sheets.
A macroeconomic approach is certainly not sufficient to meet the challenges of measuring these risks and a bottom-up approach would appear more relevant.
Finally, everyone knows that the “photographic” balance sheet analysis, as serious and modeled as it may be, is only the reflection of a worked fence, whether or not it is certified. The evaluation resulting from this “rear-view mirror” analysis offers some elements of answer, but no longer reflects the reality of present but above all future needs.
It is therefore that to these industrial elements of quantitative measurement must be added more qualitative and personalized information. Tailoring would make the cost of this assessment too disproportionate, but alternative solutions should nevertheless be proposed.
Various information could be provided by the company itself, with the risk of reinforcing the suspicion of the financial partner to the applicant “in need”. They could be sought directly by the evaluator, this time to frustrate the applicant in question.
It is true that a business leader in search of funding shows a real determination to find the missing euros, but this determination is too often at the expense of the quality of its communication and financial data that he brings to support his approach, and it sometimes seems relevant for him to be accompanied to “desensitize” the discussion.
Other new actors, propose a communicative and dynamic approach of the notation, in the service not of the sanction but of the anticipation of the risks and their possible correction. This is a very virtuous initiative that combines historical balance sheet analysis and individual contributions of corrective measures, mostly through financial support, to re-evaluate the values supporting the rating. These more relevant data, because they are more prescriptive, lay the foundations for better negotiation and hence better financing.
It seems to us that we miss the cornerstone of all his efforts, and that could be synthesized through the image of the video. These evaluations indeed require a freeze frame, a photograph, whereas we could propose a continuous film of trends of evaluation indicators. This is exactly the approach proposed by TAIGA, whose cloud solutions dedicated to BFR optimization have been labeled by the Finance Innovation division.
TAIGA has been able to observe, through its experience of BFR issues and management of cash flow forecasts, that risk analysis by flows is ultimately and simply a relevant and actually dynamic analysis. The new normative constraints require more and more information, reporting on the evolution of liquidity. The transposition into French law, for example of the AIFM Directive, requires depositories to monitor cash flow flow.
Because if the simplest answer when we wait for a settlement is to call the debtor rather than to model the expected date at which the payment should mathematically arrive, dynamically follow the flow gives a true picture of the reality of a exploitation, and a trend from the past to the future.
The cash flows clearly show a history of whether a company has generated cash and in what proportion, its current needs and, if it is structured to present cash forecasts, its future needs. The analysis of past flows offers a lot of other information, in particular the ability of a company to have correctly planned in the past and sometimes with a lot of anticipation of a landing, and therefore its ability to predict accurately. This dynamic and well-constructed vision is precisely proposed through the technology developed by TAIGA, which devotes 15% of its expenses to the research and development of monitoring techniques for the exploitation of SMEs.
The cash flow monitoring methodology can thus be applied to any other type of flow managed by the companies, outstanding customers, outstandings, inventory turnover, realized vs. budget … What matters then is how at any time make the information available. And the virtue of a platform connected to the information systems of companies, be they accounting, management or treasury, is to propose this answer through different indicators for monitoring these past, present and future flows, modular adaptable, always putting them in perspective, comparing them if necessary, and certifying that they are the faithful image of the accounts.
This positioning therefore appears to be that of a trusted third party, whose role is not to certify accounts but simply to ensure a faithful and undistorted transcription of the management of the company. To show its capacity to generate cash, to show the stability or the control of its outstandings, to analyze by cash flows the main items of products and expenses, to show its ability to predict, these are the complementary answers to be given to risk monitoring. short term.
This seems to us to be another element of response to SME risk assessment issues. Communicating clearly through this value-added analysis of the flows makes it easier for banks to read them, who do what happens in their daily analysis. This reinforces the necessary mutual trust which conditions over time short or long credit facilities. Communicating transparently contributes to this climate of trust, at a time when the tax administration has imposed a standardized file format for recovering electronic accounting data through the amended 2013 Finance Act. To go a step further, this monitoring could one day be completed, in France, a trust on current assets.