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Financial crisis, SME financing and their performance

In this paper authors analyze the impact of global financial crisis on the financing and performance of small and medium enterprises (SME hereafter) in Croatia. Adverse events in the financial and real economy arisen as a consequence of global crisis have further increased the obstacles in financing and worsen the market position of the SMEs in comparison to large enterprises. Therefore, the aim of this paper was to identify the main changes in SME financiering and find out how the growing illiquidity in the country has impacted their profitability. Authors obtained the results by combining two methodologies: survey and panel models. In order to explore the situation of SMEs in Croatia, authors conducted the empirical research in spring of 2012 and constructed data panel by using financial data from annual reports of SMEs. The research results suggest that the availability of bank financing is worsened after the crisis and that the companies have turned to alternative sources of funding. Also, authors find evidence that the liquidity of SME companies affects their profitability. In addition, the results indicate that aggressive working capital management, which is reflected in a shorter cash cycle, increases the profitability of SMEs.

SME, Liquidity, working capital management, profit-ability, financing

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