A French project to distribute $ 23 billion to small businesses

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Officials said that France plans to raise 20 billion euros (23 billion dollars) in equity-like loans for small companies affected by the Corona crisis by offering government guarantees to investors for the first 2 billion euros in losses.
Amid fears of default among companies already burdened with record levels of debt before the crisis, the French government wants to launch the program by early next year as it grapples with the economic fallout of the Corona pandemic.People familiar with the proposals told Reuters that under the plans submitted to the financial sector on Monday, banks would initially lend to small and medium-sized firms and then sell 90 percent of their loans to institutional investors.

This would restrict banks’ exposure to risk to 10 percent of loans, while also directing funds to viable companies.

Since the issue involves a general guarantee, the program must be approved by the regulators concerned with government aid in the European Union, in particular the interest rate that will be charged.

A source at the Finance Ministry said, “The discussions are going well. The European Commission is very interested in the program, but we have not settled on an exact figure.”

Another source familiar with the discussions said the interest rate is unlikely to fall below 3 to 5% as the loans will be small compared to the rest of the debt on corporate balance sheets.





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