The Central Bank’s tightening policy with macro-prudential measures caused banks to reduce their credit capacity, making it difficult for businesses to access the financing they needed. In the financing bottleneck, the interest rates applied by the companies that fund each other on forward sales have exceeded 40 percent.
According to the news of Merve Yiğitcan from Ekonomim, Businesses, which could not overcome the financing crunch because they could not reach bank loans, started to face the maturity difference of more than 40 percent from raw material producers and wholesalers in order to continue their production. Considering that the cost of revolving credit is currently at the level of 13 percent, it is seen that the market funds itself up to 3 times more costly. Stating 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 drew attention to the fact that the capital need of companies has increased 5 times in the last few years, and that SMEs, which are exposed to high maturity differences in the market, have a vital role 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.
INTEREST IN THE MARKET RESISTED TO 50 PERCENT
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.
RAW MATERIALS APPLY HIGH INTEREST DUE TO POSITION RISK
Reminding that many large and small raw material manufacturers went bankrupt especially in 2008, Eroğlu continued his words as follows: “While it was thought that very large raw material companies in Turkey were selling their goods with high interest rates and making big profits, they went bankrupt. Because he sold his property in TL with 40 percent interest, he took all his checks, but when there was a devaluation, they all went bankrupt. Looking at the story from here, they seem to be making a lot of money, but they have a lot of open positions. Of course, against that open position risk, the raw material producer puts that maturity difference. Considering that the exchange rate is suppressed, there is a risk for them as well.” Noting that the majority of those exposed to high maturity differences in the market are SMEs, Eroğlu said, “It is very difficult for SMEs to find financing under these conditions. It is very difficult to buy goods with 40-50 percent maturity and then process and sell them. Here, the state needs to protect the weak, and especially in this period, it is necessary to facilitate the access of SMEs to finance.
COMPANIES SAVE THE DAY
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.
“RAW MATERIALS CANNOT BE NET EXPORTERS”
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.”
“Banks do not even give prices to loan requests”
Çetin Tecdelioğlu, President of Istanbul Ferrous and Non-Ferrous Metals Exporters’ Association (IDDMIB), said that companies had to turn to wholesalers when they could not use loans from banks. Emphasizing that the situation that is blocking the market here is that the banks do not provide loans, Tecdelioğlu said, “The most important complaint we received in our meetings with industry stakeholders is about loans… Banks do not provide loans, they still do not even give a price to loan requests even though it is the beginning of the year, they do not talk at all. There are those who miss their export orders because they cannot find financing. The fact that the wholesaler is opening a maturity, albeit at a high level, is in our favor in this case,” he said.
“INFLATION IS HIGHER THAN APPLICABLE”
Hüseyin Çetin, Chairman of the Board of the Turkish Footwear Industry Research Development and Education Foundation (TASEV), stated that the inflation in the market is higher than it appears, and that the raw material producers in the sector give their goods to the sub-industrialists with a due date accordingly. Emphasizing that there is a maturity difference of at least 3 percent on a monthly basis in the sector, this is very high annually and is not at an acceptable level, Çetin said, “When banks cut down on lending, companies tend to use the maturity in the market. In order for the producer to relax about financing, the government needs to prepare a financing package for the industrialists, ‘without a grace period of 1 year, with a 2-year payment, with a 3-year maturity’. This is our expectation,” he said.