engleski

Financing preferences of European SMEs

In terms of number of enterprises, number of employees and gross value added SME sector accounts for major business activity in all European countries. Lots of research and analyses confirm SMEs difficulties to access external finance due to information asymmetries, lack of collateral and lack of credit record. Lack of external finance may hamper SMEs’ and thus overall economic growth, especially for young SMEs that do not have established market reputation. The stages of financial development in European countries differ and enterprises in bank-based financial systems are perceived as not having much external financing choice. In absence of developed and widespread private equity and venture capital industry, and amid banks’ relucatance to approve loans during economic downturns, SMEs can only rely on internal funds, trade credits and various forms of direct and indirect public support. It is generally believed that financing choices are broader in mixed financial systems that besides the developed bank system rely on strong capital markets, such as are those in the UK or in the Netherlands. An overview of external financial instruments according to different stages of growth and their importance for European firms is elaborated in the paper based on novel literature contributions and policy reports. The research question is whether European countires differ in terms of SMEs’ preferred external financing instruments in general and with respect to their ownership status. The research reveals similar countries in which SMEs prefer the same external financial instruments. The presented analyses in the paper are based on the data obtained from Survey on the access to finance, conducted jointly by the European Central Bank and the European Commission, from August to October 2013. Due to the fact that SMEs are the major contributors to growth in Europe, this paper strives to give some policy guidelines on how to better utilise limited financial resources for greater SME competitiveness and overall economic growth. It also tries to fill in the research gap by analysing preferred rather than enforced external financial instruments by European SMEs.

SMEs; financing preference; access to finance; Europe

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