Today’s news by Merve Yiğitcan from Ekonomim is very important in terms of detailing the dimensions of the bottleneck created in the credit market for the sake of sustaining the New Economy Model. In Yiğitcan’s news, the unbalanced picture that emerged, where businesses fund each other with ever-increasing interest rates in order to overcome the financing problem faced by the narrowing of the credit capacity of the banks.
In the news, it is emphasized that businesses that cannot overcome the financing crunch because they cannot reach bank loans, raw material producers and wholesalers are starting to face a maturity difference of more than 40 percent in order to continue their production. Considering that the cost of revolving credit is currently 13 percent, it is seen that the market funds itself up to 3 times more costly. Expressing that the number of companies that had to reduce their production or missed orders because they could not find suitable financing, the real sector representatives pointed out that the capital needs of the companies increased by 5 times in the last few years, and that it is vital that especially SMEs, which are exposed to high maturity differences in the market, have access to credit in this difficult period. emphasizes that.
In the market where the financing bottleneck deepened, companies almost funded each other, while the interest rate applied by businesses to forward sales began to exceed 40 percent. Considering that the cost of revolving credit, which is frequently applied by companies in ordinary periods but which is not used sufficiently in accordance with macro-prudential measures, is around 13 percent, and the interest rate of commercial loans extended by private banks is in the range of 25-30 percent, it is seen that some raw material producers and wholesalers fund the market up to 3 times more costly. However, while the safes are almost empty in companies that make year-end loan closures, companies are willing to pay market interest in order not to disrupt their production due to lack of equity. Real sector representatives, speaking to EKONOMİ newspaper, pointed out that the number of companies that had to reduce their production because they could not find suitable financing is increasing, while pointing out that especially SMEs’ access to credit is vital in this period.
Those who cannot find financing in the bank are looking in the market.
TOBB Plastics, Rubber and Composites Industry Council President Yavuz Eroğlu said that the balances in the market are starting to form outside the standard at the moment, while the interest applied by the raw material producers is 1.5-2 percent per month in ordinary periods, but this rate is now 4 percent, for dollar payments. He said it was 1%. Expressing that the interest on TL payments reached 50 percent in 12 months, Eroğlu said, “Financing is like the blood in the veins of businesses. If you want to have a very healthy, complete body, but without blood you cannot live. If the firm cannot find the financing it needs in the bank, it will seek it in the market. The interest rate is so high in the market because it can’t be found anywhere else. If the company could find a more suitable source of financing, it would not go and borrow with such high interest rates,” he said.
led to bankruptcies in 2008
Margins are bottoming out
İlker Önel, President of the Istanbul Merchants Club, stated that the tightening measures taken by both the BRSA and the Central Bank were reflected in the domestic market, and that the credit contraction was ‘forced’ to load on each other. Pointing out that the open account receivables of the companies have increased in this period, Önel noted that the rates given as maturity difference in the market have increased considerably. Pointing out that some businesses have started to use it with bad intentions, Önel said, “When businesses apply interest rates to each other, the rate rises to 40 percent on average. Almost like 3 times the interest rate in banks. Generally, raw material suppliers implement this.” Noting that the lack of equity capital is leading companies to a more challenging process, Önel said, “In these market conditions, companies only save the day. Their capital is dwindling day by day. However, since he has to sell goods, you are reducing the profitability gradually this time, and if your margin is 8 percent, you need to reduce your margin to 2 percent, that is, you go head-to-head,” he said, describing the tightness of the businesses.
“The raw material manufacturer may also have to”
Gökhan Turhan, President of the Armature Association, also confirmed the high maturity differences applied by the companies. Stating that the capital needs of the enterprises increased 5 times compared to the past few years, Turhan stated that the profits of the exporters decreased with the suppression of the foreign exchange. Turhan said that in the ordinary period, the maturity difference of the raw material producers and the bank interest rates were very close to each other, and that the bank interest rates were lowered, but the market interest rate was very high. Noting that raw material manufacturers’ high interest rate practices have some justifications, Turhan continued as follows: “Raw material manufacturers cannot be net exporters, their biggest problem is there. It has to import the raw material it buys, its exports are less than its imports. As such, they cannot use appropriate loans such as rediscounts. When its profits are low, it tries to protect itself with interest in this way.”
reminds me of the 90s
Şeref Fayat, Chairman of TOBB Ready-made Clothing and Apparel Sector Assembly, said that in the domestic market, in the domestic market, a maturity difference application was observed in the sales of raw materials to the wholesaler and the wholesaler to the retailer in inflationary environments, well above the operating profits. Reminding that such high interest rates were very common in the 90s, Fayat said, “In those times, the interest gain was much higher than the real profit. The current situation reminds me of those years. Unfortunately, these practices are a method that the company accepts because it cannot get financing in an inflationary environment, and that the retailer uses from the wholesaler and the wholesaler from the raw material supplier. Saying, “Unfortunately, this happens in such unhealthy markets,” Fayat said, “Because even if you cannot reach financing, you still have to reach the goods and continue. In cases where the market is functioning unhealthy, such difficulties may arise for both parties,” he said.
“Banks do not even give prices to loan requests”
The full news is here.