European small and medium-sized enterprises (SMEs) have access to nearly twice the amount of funding as their U.S. counterparts, yet bank loans remain the most common form of SME finance in Europe, according to a recent press release. This leaves huge scope for small businesses to tap additional funding sources for loans, bonds and equities, finds new research by the Association for Financial Markets in Europe (AFME). However, many SMEs remain unaware of the options available to them.
In Spain and Italy, for example – where small businesses tend to lean most heavily on financing sources, such as banks – Italian SMEs received €233 billion in loans in 2013 compared to just €1 billion in private equity capital, while in Spain, SMEs received close to €273 billion through bank loans compared to less than €1.5 billion from venture capital and private equity sources.
With a view to helping European SMEs decide what type of funding their business needs, AFME has released the first pan-European guide, titled: “Raising Finance for Europe’s Small & Medium-Sized Businesses: A practical guide to obtaining loan, bond and equity funding.” The guide provides an overview of the financing options available, including practical tips on where and how to access funding. As an FYI, the section on equity crowdfunding can be found on page 20 of the embedded document below.
AFME represents a broad array of European and global participants in the wholesale financial markets in promoting fair, orderly and efficient European wholesale capital markets and providing leadership in advancing the interests of all market participants. Its members comprise pan-EU and global banks as well as key regional banks, brokers, law firms, investors and other financial market participants. The association participates in a global alliance with the Securities Industry and Financial Markets Association (SIFMA) in the United States, and the Asia Securities Industry and Financial Markets Association (ASIFMA) through the GFMA (Global Financial Markets Association).
Simon Lewis, chief executive of AFME, said,
SMEs are at the heart of the European economy and are a key driver for economic growth, innovation and employment. By understanding the diverse funding sources available to them, European SMEs will be better able to grow and create employment. In this respect, we hope the Guide will help facilitate decision-making on critical funding choices.
In order to encourage European SMEs to think more creatively about their financing options, AFME’s guide explains the main types of SME finance available, namely loans provided by banks and non-banks, bonds and equity finance. It introduces sources, such as venture capital, private equity, peer-to-peer lending platforms and crowd funding websites. It also includes an extensive directory of national and pan-European organisations and schemes which provide SME support, and offers practical case studies. The guide also provides a comparison of stock exchange requirements and issuance data for equity and bond markets across Europe.
George Passaris, head of securitisation at the European Investment Fund, said,
The AFME Guide will help European SMEs make educated choices about the type of funding they need and will help to improve their chances of achieving success with loan applications and bond and equity fund-raisings. It includes a useful overview of the financing programmes available from the EIF, EIB and other European institutions to support the growth of European SMEs.
Gerhard Huemer from the EU SME Association UEAPME, who supported the work on the guide, said:
AFME and its wholesale capital markets members are the link between businesses of all sizes and a broad range of investors. As such, AFME is uniquely placed to gather their expertise – and that of other organizations across Europe – to provide new ideas to all European companies looking to understand what type of capital they need.
AFME’s support for SMEs is part of a wider collaborative effort to improve economic and employment growth in Europe, driven by the European Commission. This growth agenda includes the recently announced Capital Markets Union and the Investment Plan for Europe which includes the €315 billion European Fund for Strategic Investments.