Frontpage News 2016 Improved economy h...

Improved economy helps secure loans for companies

13 April 2016

New calculations by the Danish Bankers Association show that better financial circumstances increase a company’s chances of obtaining a loan at the bank by 35 percentage points. 
 
Figures from Statistics Denmark for small and medium-sized enterprises (SMEs) show that if a company’s financial circumstances developed positively in the period 2010-2014 it resulted in almost 60 pct. of companies fully or partially obtaining loan financing from banks. There are, however, more rejections if financial circumstances worsened.
 
“When companies go to bank they should have a good gut feeling of whether it will result in a successful loan application, based purely on their own figures. They are more successful in obtaining a new loan, if their financial circumstances have developed positively, than if the case is the other way around,” the Chief Economist at the Danish Bankers Association, Niels Storm Stenbæk, says. 

See a guide on how entrepreneurs can prepare for a meeting with the bank (available in Danish)


Statistical calculations by the Danish Bankers Association show that the likelihood of obtaining a bank loan increases by over 35 percentage points with better financial circumstances - that is, if the bank take the company owner’s evaluation of changes in financial circumstances into account [1]. 
 

Figure 1: the link between SMEs own evaluation of the development in their financial circumstances from 2010 to 2014 and the result of loan applications at the bank.

Note: the total number of companies that have applied for bank loan financing is 460.
Source: Statistics Denmark and calculations by the Danish Bankers Association.
 
 

The economy needs kick-starting

The Danish economy is crawling along with low growth rates. Private consumption is developing at a disappointing level and export is also experiencing difficulties. However, the latest figures from Statistics Denmark show that progress in companies’ sales continues. Year-to-year growth in February was for instance 4.3 pct., which is higher than previous months. Nevertheless, there is still a need for growth reforms.
 
“Commercial bank loans have been influenced by low demand for a long time now. Better economic prospects for companies, amongst other things, will boost this. That’s why we need to get the Danish economy in gear,” Niels Storm Stenbæk says.
 
[1] Calculations by the Danish Bankers Association show that the companies’ evaluations of their own financial circumstances have been correlated fairly well with the actual key figures. Naturally, this cannot cover whether the change happened from a level that was already satisfactory. Other analyses have, however, confirmed the link between the ability to generate high revenue and equity, and the chances of obtaining a loan.
 
 
Further information:
Stine Luise Hansen, Head of Media Relations at the Danish Bankers Association.
Tel.: +45 3016 1009
E-mail: slh@finansraadet.dk
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