Over the last twelve months we have seen a sustained upturn in inflation that has led, in the case of Spain, to the annual rate of change of the CPI standing at 8.7% in May 2022. Behind the rise in the CPI is the escalation in the price of electricity and gasoline, which in turn has a direct impact on the price of basic consumer goods, such as food.

The role of central banks in this situation.

The main mandate of central banks is to monitor price stability, i.e. that inflation does not get out of control. The main tool they have to fulfill this mandate is interest rates: when inflation rises, they raise rates to contain the generalized escalation of prices and thus prevent the cost of living from getting out of control and impoverishing the population, either through excessive inflation(hyperinflation) or through a fatal combination of escalating prices and shrinking growth(stagflation). This is the policy currently being pursued by the US Federal Reserve, which recently announced the largest rate h ike at a meeting in 22 years. Now, the European Central Bank (ECB) has sent the message that it could start raising interest rates in the Eurozone in the coming months.

Interest rates indicate the theoretical price of money. They are the reference for setting all types of financial indexes and costs, from the yield on a Spanish bond to the Euribor or the APR of a loan for an SME. Therefore, rising interest rates lead to higher financing costs. After a decade of ultra-low rates, banks are now more than willing to start raising the costs they pass on to their customers, be they companies or individuals, and thus begin to improve their profit margins.

Confirming, an alternative to credit hardening.

In view of the increase in financing costs and the tightening of the conditions for obtaining a loan, more and more companies are looking for financing channels outside the banking sector to ensure access to liquidity for their operations. In this context, non-bank confirming is an attractive option for SMEs and large companies, as it provides liquidity to the supplier without impacting the CIRBE in a secure manner, among other advantages.

From Finalbion we provide this service in a fully digital way through our technology platform, with which we have provided more than 1,000 million euros in financing to more than one hundred business groups in Spain. You can learn more about our platform through our Supplier Guide.