Financing SMEs in Europe: Stylised Facts, Policies, Challenges

Abstract:

This paper describes the main features of European SMEs’ financial behaviour and the policies recently put in place to support their funding. European SMEs are structurally more leveraged and charged with higher interest rates than large firms. Moreover, the crisis has deeply affected their fund-raising capacity, as banks reduced credit supply while non-bank funding was unavailable to most SMEs. Against this background, EU has focussed its policies on long-term investment and on a more favourable environment for SMEs financing, including through the launch of the Capital Markets Union.

At the national level, most governments have provided guarantees and enhanced the role of national development banks. Nevertheless, key issues are still outstanding, such as the funding of innovative firms and the improvement of transparency and of the legal and regulatory frameworks.