Austria’s small and medium-sized businesses continue to struggle with the effects of the pandemic. According to a survey by the Financial Ombudsman team, 86 percent of companies that needed a Corona loan from Austria Wirtschaftsservice (AWS) or the Austrian Hotel and Tourism Bank (ÖHT) have not yet repaid it.
Almost half of SMEs (43 percent) even say that they will probably not be able to make full use of the Corona support. If the repayment conditions for the state-guaranteed support are not relaxed, Financial Ombudsman Gerald Zmuegg fears that the expected bankruptcies of 6,200 companies this year will be significantly exceeded.
“Up to €300 million in AWS loans are at acute risk of default”
The expert warns: “Up to €300 million of state-guaranteed AWS loans – the total volume is €3.353 billion – are at acute risk of default! The wave of bankruptcies could be significantly larger than predicted by the Credit Protection Association.” In the worst case, he expects as many as 10,000 corporate bankruptcies this year.
In a survey of 978 small and medium-sized enterprises included in the transparency database of Corona support payments, their financial situation was examined from 7 to 24 July. In total, 758 of the surveyed companies indicated that they had taken out a loan as a result of the Corona measures since 1 April 2020.
86 percent of companies have not been able to repay the loan so far
About three-quarters of the companies surveyed have taken out a government-guaranteed loan via AWS or ÖHT. A quarter were forced to take out additional loans without guarantees. Restructuring and credit expert Zmuegg: “86 percent of the companies surveyed said that the majority had not repaid their Corona loan so far.”
It is recommended to check possible advice errors
He advises companies that are already struggling with repayment problems or are in the process of restructuring to check for possible advice errors, both with their home bank and with the financing institution. Other options include trying to extend the loan with the bank without security, investigating claims against the state or instituting a partial chargeback to obtain an extension.
“The development is shocking,” Zmuegg explains. “Since the end of 2020, we have been pointing out to the Ministry of Finance that the terms of these loans are too short. Unfortunately, our warnings were not taken seriously. When the loan was granted, it should have been clear that the stated maximum terms were not realistic. The shorter the term, the higher the defaults. Most AWS loans expire on December 31, 2024, the ÖHT loans expire in 2025. The closer the end of the term, the higher the defaults will be.”
The Financial Ombudsman team supports 200 affected companies
The Financial Ombudsman team is currently conducting out-of-court discussions for around 200 affected companies and supporting them in documenting the banks’ advisory errors in legal proceedings. Zmuegg: “The cynical thing about the situation is that companies are being driven into bankruptcy that basically had a functioning business concept and a healthy financing structure because of the way their business was running before Corona. Now they actually just need more time.”
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
