In the spotlight: Financing European SMEs

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Small and medium-sized enterprises are meant to be the machine that drives Europe’s growth-free markets to recovery. But each country’s environment for SME funding remains even more disparate than their economies.

In this special report, Euromoney investigates the challenges facing SMEs in Europe’s biggest markets, and looks at lessons that could be learnt and applied across the region. What can be done to encourage banks to lend? Which countries have the best capital market solutions? Can the state play a positive, proactive role?

Overview: Banks struggle to find the SME factor

Allegations against RBS’s treatment of struggling small and medium-sized enterprises have once again cast a harsh light on banks’ treatment of these companies. While banks deal with zombie borrowers and tout loans at fat margins to stellar SME credits that don’t want them, it is SMEs in the middle ground that need more help.Peter Lee and Louise Bowman report

Austria: bank lending dominates

Most Austrian SMEs depend on banks for funding. And while lending by insurers is emerging, it will be limited to the top end of the borrower market
France: the rise of the private placement

French public placement is broadening to the SME level as real-money investors such as insurance companies diversify their investments
Germany: banks still dominate

Much of the funding of Germany’s economically vital SMEs continues to come from bank loans. Private placements and specialized bonds are of growing importance, but sometimes problematic from a risk point of view

Italy: financing gap widens

Lack of SME demand for funding might have been exaggerated. But many of those that seek funds might be risky prospects

Netherlands: minority benefits

An above EU average number of SMEs do not require funding beyond their own sources; the smaller number that do are facing above EU average difficulty in getting bank loans

Nordics: a market apart

Financing for SMEs in the Nordic region is readily available and growing, driven by well-capitalized and domestic-focused banks. Capital-market funding solutions are growing as well

Portugal: stymied by stagnation

Portugal’s economy is heavily dependent on SMEs. The minority that are exporters are still borrowing at favourable rates; the remainder are deterred by the weak domestic economy

Spain: ICO fills the gap

The development bank has increased its capacity to lend and broadened the range of its corporate borrowers

Switzerland: no credit crunch here

There is no shortage of demand and supply for SME funding; of more concern are attacks on corporates from the left

UK: states woos reluctant borrowers

Political imperatives are driving the background noise to UK SME finance. But the companies themselves don’t seem to be listening


Related articles:

ECB battles Basel rules in war for SME finance
December 2013
Euromoney investigates whether the need to stimulate European SME financing will finally soften the regulatory treatment of ABS, which has now been deemed by the European Commission the vehicle through which the growth of bank lending can best be achieved. 

     The SME funding challenge

    Chain reaction: Can the need for SME finance set Europe’s securitization market free?

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

SME financing: special focus