Financing through capital markets: a very attractive option for companies

Market conditions make financing through the capital markets increasingly attractive for companies. The fastest growing option is that of new markets, created precisely to financially support small and medium-sized businesses: BME Growth and Alternative Fixed-Income Market.

There are already 150 companies in the BME Growth market. These companies have found a more flexible trading channel than the regulated market that is open to financing smaller companies. The possibility of higher returns is attractive for investors and one of the key factors for more companies to tap into this market for financing.

In recent months, there has been a proliferation of reports of companies resorting to issuing fixed-income loan notes in the market: Pamesa, Barceló, El Corte Inglés, and Urbas have recently diversified their financing sources in this way. The diversification of financiers has become a necessity, given the economic instability and the negative factors that have penalised the post-pandemic recovery process. The war in Ukraine, inflation, rising interest rates, higher energy and the cost of raw materials

With a few days to go until the end of 2022, the Alternative Fixed-Income Market has almost matched last year’s fixed-income issuance figure of 11.6 billion euros. A market that is already a benchmark in the Spanish economy as a way of diversifying and strengthening a company’s financial resources. For some of the issuing companies, this route has been the key to debuting in the markets because of its flexibility and the advantages it offers as a way to obtain liquidity.

The rising cost of credit is a particularly harsh reality for SMEs. The gradual increase in interest rates has already doubled the average cost of financing for companies compared to 2021. According to data from the Bank of Spain relating to October, banks apply an average APR of 4.51%, compared to the 2.30% set at the end of 2021 for operations of less than 250,000 euros. This represents an increase of more than 96%. For larger transactions, the situation is even worse: the APR has risen from for loans between 250,000 and 1 million euros (+119.15%) and from an average of 1.12% to 2.95% for larger amounts (+164%).

Therefore, alternative markets have become an increasingly attractive source of financing. They are enabling an increasing number of Spanish companies to strengthen their equity or diversify their external financing through capital increases, debt issues or IPOs. At Kaizen Consulting, we are specialists in these operations, which we recommend in some cases as a suitable financing alternative. In any case, we always insist on the need for expert advice to operate in alternative markets, with an exhaustive analysis of the financial reality of each company and of all the options available to them. Don’t hesitate to contact us to find out about financing options for your company.

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