SME finance: Weak loan demand is the real problem, say banks

By:
Peter Lee
Published on:

In November, the European Central Bank published the findings of its latest survey of SMEs in the euro area. It contacted over 8,000 firms, the vast majority with fewer than 250 employees, and concluded with the headline that the dominant concerns for these companies was finding customers and access to finance.

Surely a sufficiency of the first is usually a prerequisite for the latter.

The responding SMEs reported a net increase in their need for financing, with the difference between those reporting an increasing need and a decreasing need standing at five percentage points. They also reported a slight deterioration in availability of credit, with 12% reporting applications for loans had been rejected, up from 11% during the previous survey period six months earlier. The percentage of SMEs reporting access to finance as their main problem remained broadly stable at 16%.

Armed with these numbers and citing a European Commission study from 2012 that found SMEs employ 70% of the region’s workers, Yves Mersch, executive board member at the ECB, warned: "Europe should be very concerned by the difficulties that SMEs are currently facing – in particular those in countries under stress. Firms have been...