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Bank Guarantee For Companies Facing Cash Flow Difficulties With The Mutualité de Cautionnement


It is in times of crisis that business support makes the most sense. This is precisely what prompted the Chamber of Commerce and its House of Entrepreneurship to take exceptional support measures through the Mutualité de Cautionnement. A welcome breath of fresh air, we believe.
by: Aurélie Mohr-Boob
photo: Corinne Jamet
featured: Charles Schroeder

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It is in this context that the Chamber of Commerce has taken the initiative to adapt the format of its Mutualité de Cautionnement with exceptional responsiveness, which it presented at a press conference on March 13.

The Mutualité de Cautionnement was presented by the Chamber of Commerce at a press conference on March 13. It is a complementary tool supported by the Chamber of Commerce that can be used in exceptional situations or in cases of force majeure to help companies get through financial difficulty or a difficult period. The Chamber of Commerce represents the majority of companies in Luxembourg and is usually the entity that can support companies’ requests for financing from banks. More than ever, it supports its citizens, and when necessary, tries to save them. The Mutualité de Cautionnement is normally a player that can support companies’ requests for financing from banks.

“It’s been quite fluid. I had a need for cash and in two days I got an agreement. It was the bank that appealed to the Mutualité de Cautionnement.”

Since the beginning of the Covid-19 pandemic, the hotel, café, restaurant and event sectors have suffered a lot. Suppliers and subcontractors in this sector are also being affected as a result. Not to mention the shops and crafts which have also had to close. As a result, the number of applications for additional lines of credit from banks has increased. The banks are aware of the high risk of liquidity losses and bankruptcies. They are therefore asking for additional guarantees (financial guarantors, mortgages, personal funds, etc.) from their business customers.

No bandage or panacea

The Mutualité de Cautionnement offers to act as guarantor for up to 50% of any company bank loan of up to €250,000. It undertakes to respond to each request within 48 hours. The objective is to support them in avoiding the pitfall of the loneliness of the entrepreneur facing an anxiety-provoking situation due to its indefinite duration. This solution is neither a band-aid nor a panacea because the help is real and quick. Will it be enough? It depends on how long the crisis lasts… Companies wishing to take advantage of this guarantee will have to apply directly through their banks, which will decide on the release of credit. The Chamber of Commerce is in contact with the banks to organise the provision of the bank guarantees.

Additionally, a helpline has been set up at the House of Entrepreneurship (42 39 39 – 445). It has been in operation since 16 March. Timings are from 9am to 12pm and from 2pm to 5pm on workdays. Another line is dedicated to remote assistance, to ensure service continuity is retained with the usual partners of the Chamber of Commerce (42 39 39 – 330). The continuity of the service is thus ensured.

“I provided the entire list of cancellations in March and the prospective study on 2020 and 2021.”

A conditional agreement

This measure complements the draft law submitted to Luxembourg’s government on 11 March for the creation of an aid scheme for SMEs in difficulty. The Minister for Small and Medium-sized Businesses and Tourism, Lex Delles, pointed out that the granting of the aid was subject to three conditions: an event was recognised as having a harmful impact on economic activity during a given period, that the firm was experiencing temporary financial difficulties and that there was a causal link between those difficulties and the event in question.

Charles Schroeder, Managing partner at Partyrent (rental of furniture for events) benefited from this aid scheme due to a sharp drop in business in the last week of February and the cancellation of all events in the country until further notice. The short-time working of the 58 employees and, among other things, the suspension of vehicle insurance contracts have made it possible to reduce fixed costs to 20% of the usual level, but the employer still has to pay part of the cost, and income is not as expected. He testifies: “It’s been quite fluid. I had a need for cash and in two days I got an agreement. It was the bank that appealed to the Mutualité de Cautionnement. For me it worked because the 2019 balance sheet was good, the bank knew it was taking little risk. Nevertheless, I provided the entire list of cancellations in March and the prospective study on 2020 and 2021. I already know that the following months will be complicated because our sector will be the last to return to normal activity. »

Recourse to debt generally occurs from a development perspective (investments) rather than survival (fixed costs). “For us, this is unheard of. For most companies, there will be many lessons to be learned from this crisis.”

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