Firms still assessing their access to financing positively

01/31/2022 / Press release

Firms are reporting improved access to most financing, which means that the finance gap (the gap between financial needs and access to financing) was narrower in 2021 than in 2020, according to Banka Slovenije surveys. Access to financing nevertheless remains one of the least significant limiting factors for firms. A shortage of qualified labour and experienced managers was again highlighted as the most significant limiting factor last year. This issue is being reported by more and more firms each year, which Banka Slovenije attributes to demographic changes in the labour market. Firms are still reporting that, similarly to previous years, they will continue financing their planned investments mostly with internal resources, or certain bank resources.

Banka Slovenije has been conducting its survey of firms’ access to financial resources since 2011. The survey aims to measure the opinions of firms with regard to the state of the financing market, and provides useful backup to the information obtained from banks. Questions on the impact of the pandemic on corporate performance were also added to the standard questionnaire on access to financing in 2021.

First, we should say that 45% of the firms cited the limited availability of qualified labour and experienced managers as the most significant limiting factor. This was followed by production costs and labour costs, and then by foreign demand for large enterprises and regulation for SMEs. As in recent years, access to financing remains one of the least significant limiting factors, alongside payment indiscipline.

The survey then focused on firms’ financial resources and their access to them. Firms assess that they had sufficient financing at their disposal in 2021: internal resources thanks to the improved economic situation, and favourable financing from external providers and government assistance. They therefore assess the situation in financing as better in 2021 than in 2020. We also find that firms in Slovenia are mostly financing themselves from internal resources, including retained earnings and asset sales, and from bank resources (loans and current account overdrafts). Leasing also represents an important source of financing. Subsidies and subsidised bank loans accounted for a large share of corporate financing last year, as a result of the government assistance provided during the pandemic. More than 60% of the funds obtained by firms are being earmarked for investment and current operations.

Firms are reporting improved access to most financing, which means that the finance gap (the gap between financial needs and access to financing) was narrower in 2021 than in 2020. It is still positive, and increased for all firms, which means that demand for external financing is greater than access to financial resources.

Firms submitted fewer applications for all sources of financing in 2021, with the exception of SMEs’ applications for trade credits and other external financing. Large enterprises mostly reduced their applications for leasing, bank financing of both types, and factoring. SMEs reduced their applications for bank financing of both types. Firms are very successful in obtaining external financing: around 90% of them receive at least some of the desired funds, while the number of refused applications is negligible for all sources of financing. Large enterprises are still more successful than SMEs in obtaining external financing of all types.

Firms are also expecting access to external financing to improve this year.

According to last year’s survey, which as stated earlier does not take account of the current situation and risks in the economy, the vast majority of firms are planning investments over the coming years (fully 91% of SMEs and 98% of large enterprises). They are investing most heavily in machinery and equipment, real estate, and expansion of turnover. Similarly to last year, the majority intend to finance the planned investment with internal resources and bank loans.

Corporate response to the situation caused by the coronavirus pandemic

Firms reported that the impact of the pandemic on performance in 2021 was smaller than in the previous year. The survey revealed that, similarly to 2020, under the impact of the pandemic firms first adjusted their expenditure on business travel and investment, and then later their wage costs and research costs.
The pandemic had the greatest negative impact on operating costs, supply chains, production costs and labour costs, turnover and sales revenues, and prices of production inputs. The largest obstacles that firms face are operating cost adjustments and absences from work. Overcoming difficulties in the production chain gained greatly in importance in 2021, while the importance of cashflow management and demand declined.

Fewer firms applied for government stimulus in 2021. More than 90% of applications were submitted for wage-related measures, while significantly less were for measures related to taxation and additional financial incentives. The majority of firms that submitted an application also received their funds, although large enterprises were generally more successful than SMEs.