Small and Medium Businesses Suffer as Spain Bank Loans Shrivel

There was a time when Ivan Moreno, 34, felt he was on the verge of something big — when it seemed right to settle his rapidly expanding skateboard company into a modern warehouse on the outskirts of this city, when orders piled up from stores around the world.  Those days are gone. Like the owners of many small and medium-size companies in Spain, he is just struggling to stay alive now, a victim, he says, of the vast restructuring of Spain’s banking sector after the collapse of the real estate bubble in 2008. Mr. Moreno said his bankers closed his roughly $250,000 credit line step by step, imposing harsh repayment plans and effectively strangling his young business. “So many times, I went to the bank and said, ‘What did I do wrong?’ ” said Mr. Moreno, who recently had to lay off almost all of his employees, including a childhood friend. “But they just said they wanted their money back.” Experts say that what happened to Mr. Moreno is happening to small companies all over Spain, as many of the regional savings banks that such businesses once relied on are being eliminated or swallowed up, in a series of steps intended to deal with the hundreds of billions of dollars in bad loans from the real estate meltdown. Whether the strategy is working remains an open question. Moody’s recently downgraded more than a dozen Spanish banks, including the two largest, and on Friday, a major bank warned that it would need an additional $23.9 billion in aid, far beyond what the government estimated when it seized the bank this month. But experts say there is little doubt that the loss of credit is hurting smaller businesses, contributing to Spain’s troubles by raising unemployment and cutting tax revenues, making it harder to bring its budget deficit down to manageable levels. The credit loss hits particularly hard in Spain, where more than 60 percent of the economy, and 80 percent of the jobs, come from small and medium-size companies. More than 500,000 small businesses have shut down in the last few years. Mr. Moreno said that one year his company, Nomad Skateboards, sold more than $1.3 million worth of skateboards and accessories in 20 countries. These days he is looking for a buyer for his warehouse and trimming his product line to just skateboards and T-shirts. “If you cannot buy, you cannot sell,” he said. “If you cannot sell, you cannot make a profit.” Many are done in by their inability to get the credit they need to run day-to-day operations. “The savings banks that these people got their loans from don’t even exist anymore,” said Alfonso García Mora, director general of AFI, a Madrid-based financial consultancy. “Those banks have been taken over by bigger banks that aren’t interested in these kinds of loans. Or they have been taken over by banks in another region, where the local businessman is not known.” Such changes might be felt for years to come. “We have lost that local knowledge,” Mr. Mora said, “and it was crucial to deciding whether or not to make a loan. It is a problem we will have for a long time.” A few years ago, Spain had 45 regional savings banks. Today, there are only 13 and even their future is uncertain. Some have been merged with other banks and others have been taken over by bigger, more robust banks as part of efforts to reassure global markets. Many business owners say the regional bankers they worked with, sometimes for decades, may still be sitting in their chairs at the local office. But they no longer have the power to approve loans, even if they wanted to, and usually they are just delivering bad news. That means trouble in a country with 25 percent unemployment and no signs of an economic recovery. The warehouse district that is home to Mr. Moreno’s company is virtually deserted these days. Charo Albás Vives, who owns a children’s shoe company, Colores, is in similar straits. Her bank withdrew her $65,000 credit line two years ago. At first, she said, the bank wanted her to return only half of it. But after she managed that, the bank told her that she would have to repay the rest, starting immediately.