Companies do not fully feel the effects of interest rate hikes until after five quarters

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5 quarters. That’s the time it will likely take for the interest rate hikes by the U.S. Federal Reserve to fully impact the interest expenses of companies, according to a new study by the Federal Reserve Bank of Boston (see the study in English here). This is the reason why, after a year and a half of implementing anti-inflationary measures, only now are companies starting to experience an increase in the financial cost of their debt.

The graph shows the historical evolution of the interest rate of the American Federal Reserve (light blue line) and the non-immediate effect on the financial cost for companies (red line).

This delayed effect of restrictive monetary policies is also likely to be seen in the European realm. Since March 2022, both the U.S. Federal Reserve (the Fed) and the European Central Bank (ECB) began raising reference rates in an effort to curb inflation. Since then, the Fed has raised its rate from nearly zero to 5.25%, and the ECB has raised its main reference rate to 4.5% following the recent 0.25% increase on September 14th.

When central banks raise their interest rates, companies must pay higher rates on any variable interest debt they have, and on any debt they refinance. This leads to the need to offset this increased cost by reducing expenses and, in severe cases, by containing wages or laying off some of their employees. The rising cost of debt can also cause treasury difficulties and loan defaults.

The researchers of the mentioned study state that “regarding the current cycle, this finding suggests that most of the interest rate hikes have not yet been fully transferred to companies’ interest expenses.” They add that “it’s possible that the initial rate hike of 0.25 percentage points in March 2022 has fully impacted the interest expense ratio of companies, but they have not yet felt the full impact of the subsequent 5 percentage point hikes.” This contrasts with other parts of the economy, such as the real estate market and the banking system, where the high interest rates have already had an impact.

For companies, it is time to prepare for this rate hike which, in a deferred manner, will have an impact on their operating accounts and their treasury in the coming months. As always, Altria Corpo will be there to assist these companies in finding the best financial solution for these situations.

57% of companies will look for alternative financing in 2023, according to the Altria Corpo and IEF Barometer

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https://www.slideshare.net/EloiNoya/rdp-resultados-barometro-financiacion-otono2022pdf

Altria Corpo and the Instituto de Estudios Financieros (IEF) have published in February 2023 the results of the third edition of the Fintech and Alternative Finance Business Barometer. This Barometer collects on an annual basis the opinions, personal experience and expectations of companies and corporate finance providers (bank and alternative) about credit granting policies, and in particular the knowledge and use of fintech and alternative finance by companies. A total of 138 companies, 39 alternative financiers and 14 banks responded this time to the questionnaire, which has already become a benchmark in the sector.

Among the most significant results of the Barometer is the perception that access to bank credit has been difficult in 2022 and will continue to be difficult in 2023. Only 18% of the companies surveyed had found access to credit easy or very easy. In the face of this difficulty, companies are moderately optimistic about the role of alternative financing to at least partially cover this shortage of bank credit.

In a context of high inflation and a possible economic recession, financial agents, both banks and alternative financiers, believe that they will further tighten their lending policies and are quite likely to raise interest rates on corporate financing.

The Barometer also polls knowledge and use of Fintech and alternative finance. In this regard, there is a growth in awareness of non-bank financing alternatives, with more than 75% of companies able to mention an alternative finance provider and 56% having used their services.

As in last year’s Barometer, as many as 57% of companies say they will be looking for non-bank sources of finance in 2023. For all these companies and those that are not yet aware of alternative financing or simply need expert advice on financing issues, Altria Corpo will be there to help them find the best solution for each business situation.

See the main results of the Barometer:

Altria Corpo at The District, the event for real estate investment and financing

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The first edition of The District, an international event that puts real estate projects in contact with investors and funders from all over Europe, took place in Barcelona from 19 to 21 October. Altria Corpo was present in these three days contacting debt funds specialised in financing real estate projects.

The sessions that took place highlighted the growing and important role of alternative financing to carry out all types of real estate projects, from residential to logistics, industrial, retail and hospitality, or hotels, in a context of economic recession and credit crunch.

It is worth highlighting the dynamism of this sector despite the difficult macroeconomic circumstances, with new formulas such as Build to rent, coliving, senior living, student residences, data centres, etc., making headway. Innovative financing formulas were also presented, both by alternative funds and the so-called proptechs, as well as the possibilities offered by blockchain technology and the tokenisation of assets and debt.

Altria Corpo took the opportunity of these days to strengthen its relationship with many funds and will continue to expand its already extensive list of real estate financing solutions for the benefit of its clients.

Altria Corpo obtains 50 million in financing for its clients up to June

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The wide variety of financial solutions obtained is the main feature in a year marked by the exit of the pandemic and the restriction of bank credit in a context of inflation and probable recession.

The financial consultancy Altria Corpo, which specialises in advising medium and large companies on financing, raised 50 million euros in financing for its clients in the first half of the year, with more than 30 transactions successfully advised.

In a context of great difficulty in accessing bank credit, the firm has obtained very varied and innovative financial solutions, both from the banks themselves and from alternative financing.

Some of the most significant operations have been the Sale&Lease-back of an industrial building for a company in the metal sector, for which the company obtained a liquidity of 2.8 million euros to undertake its business plan; a mortgage loan of 1. 2 million second-ranking mortgage loan on its facilities granted to an industrial company by a public financing institution; a loan of 5 million euros to a plastic packaging company granted by a debt or direct lending fund; the financing of the acquisition of an industrial company in a 50% leveraged operation thanks to the ICF; and the advisory and execution of a 7.2 million euros syndicated loan for an industrial company, with the participation of seven financial institutions.

Likewise, in a difficult context for many companies, after two years of reduced income due to the pandemic, Altria Corpo has advised some clients in the novation of Covid-19 loans with ICO guarantee, in the search for alternative financing to complement bank financing and reinforce the liquidity of companies, or in the processing of operations of the Fund for the Recovery of Companies affected by Covid-19 (FonRec) managed by Cofides. Of the latter FonRec operations, it is worth highlighting the financing by means of personal loans and equity loans for a total amount of 4,300,000 euros to an important catering group.

As Ramiro Lama, Altria Corpo’s partner and head of financing, points out, “it is in operations of more than one million euros and where companies have more difficulties in obtaining financing, where Altria Corpo can give more added value to the relationship with its clients. Altria’s in-depth knowledge of all the financial solutions available on the market and its ability to structure a proposal adapted to each need are the reasons why medium-sized companies find in Altria the right partner for their search for financing“.

The first half of 2022 also saw important milestones for Altria, such as the strong boost in activity in Madrid with the incorporation of Rubén Huertes and Fede Suárez, and the consolidation of the alliance with PKF Attest in areas that complement Altria Corpo’s offering, such as Corporate Finance, Debt Capital Markets, Technology and Legal and Tax Advisory, among others.

Altria is a Barcelona-based firm founded in 2014 by Albert Gumà. Its clients are medium and large companies, to which it offers its expertise in all types of debt and equity financing, and access to more than 170 financial providers including banks, alternative financing, public financing, debt funds and other instruments. In its almost ten years of existence, Altria Corpo has positioned itself as a benchmark in the search for financing for medium and large companies, with an accumulated amount advised of more than 350 million and more than 600 operations. The scope of the companies advised covers the whole of Spain, with a concentration in Catalonia, which represents 70% of the total volume advised.

Talk by Eloi Noya at Acció: “From crowdfunding to tokenization”.

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Our Managing Director, Eloi Noya, was invited by Acció – Agència per la Competitivitat de l’Empresa, the Catalan Government’s agency dedicated to promoting innovation and internationalization of Catalan companies, to give a presentation on the different alternative financing instruments available to small and medium-sized enterprises.

The presentation, entitled “From crowdfunding to tokenization”, took place on 26 April and was attended online by more than 200 companies who were able to learn first-hand about the many solutions that exist on the market and which Altria Corpo allows access to.

Among the most relevant instruments that Eloi Noya explained are some that are still largely unknown by the owners and financial directors of small and medium-sized companies, such as the following:

  • investment crowdfunding or equity crowdfunding, which allows capital to be raised for start-ups or companies that need equity to undertake strong growth.
  • private debt funds or direct lending for the medium-sized segment of companies that want to make investments with more flexible repayment financing adapted to expected cash flows.
  • balance sheet asset-backed financing, with imaginative solutions ranging from the use of existing fixed assets for a rent-back, to a loan secured by inventory, to the more familiar factoring or the use of customer receivables as collateral.

Eloi Noya used the last minutes of the presentation to explain the tokenization of assets, a new concept that, through digital assets, allows the ownership of assets such as real estate, art or shares to be fractioned, so that they can be used for the transmission of these assets in a blockchain environment, or to obtain financing and liquidity in a more agile, efficient way and without intermediaries.

You can see the whole speech in the following link (speech in Catalan):