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OECD Science, Technology and Industry Scoreboard 2011
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branch 5. Unleashing Innovation in Firms
  branch 7. Access to capital

Bank loans are an important source of financing for -starting a new business or expanding an existing one. The World Economic Forum's Global Competiveness Report, which collects data through executive opinion surveys, provides insight on individuals' views on access to bank loans in -different countries. The data show that bank financing became more difficult to obtain between 2007 and 2010 in all countries owing to the financial crisis.

Debt financing is the most common source of financing for small, young firms, although innovative and high-growth firms seek equity financing more than other types of small firms (OECD, 2010). Often entrepreneurs seeking equity investment start with their own funds and those of friends and family. Depending on the size and scope of the venture, entrepreneurs may need other external sources of equity seed capital such as angel investment or venture capital.

Venture capital differs significantly among countries and is very sensitive to market cycles in terms both of amounts invested and stages of investment. Under conditions such as today's financial environment, venture capital funds may invest in later stages, leaving gaps at the pre-seed and seed stages where profit expectations are less clear and risks much higher.

Business angels, who are often experienced entrepreneurs or business people, are increasingly recognised as an important source of equity capital at the seed and early stage of company formation. Angel investors have sought to fill the financing gap left by venture capitalists by investing with other angel investors through groups and syndicates and increasing the deal size for companies seeking early stage financing.

Definitions

The ease of access to loans indicator measures how easy it is to obtain bank loans with only a good business plan and no collateral on a scale of one to seven; higher values suggesting easier access. Venture capital is private capital provided by specialised firms acting as intermediaries between primary sources of finance (insurance, pension funds, banks, etc.) and private start-up and high-growth companies whose shares are not freely traded on any stock market. A business angel is a private investor who generally provides finance and business expertise to a company in return for an equity share in the firm. Some business angels form syndicates or networks in order to take on larger deals and spread risk.

Business angel groups are formed by individual angels joining together with other angels in order to evaluate and invest in entrepreneurial ventures. The angels can pool their capital to make larger investments.

A business angel network is an organisation whose aim is to facilitate the matching of entrepreneurs with business angels.

 

Measurability

The access to loan index is based on the World Economic Forum's Executive Opinion Survey of business executives' views of their operating environment. In collaboration with 150 partner institutes in 139 countries, 13 607 surveys were conducted in 2010 with an average of 98 respondents per country. National and regional venture capital associations collect data from members. Until recently, these data were not fully comparable internationally, owing to differences in definitions and classification methods. Given recent changes in methodology, comparability has improved: inward and outward flows are treated the same way across countries and comparability of industry classifications has improved (OECD, Entrepreneurship at a Glance 2011). National and regional angel capital associations are beginning to collect data on the informal angel investment sector. The US Angel Capital Association (ACA) and the European Business Angel Network (EBAN) work to expand the set of angel investment statistics beyond those currently available. Angel investment is growing in Asia and other regions, although data are not yet collected in a way that allows for cross-country and regional comparisons.

 
Indicator in PDF Acrobat PDF page

Figures
Ease of access to loans, 2007-08 and 2009-10 Figure in Excel
Ease of access to loans, 2007-08 and 2009-10
Venture capital investment, 2009 Figure in Excel
Venture capital investment, 2009
Business angel networks/groups, 2009 Figure in Excel
Business angel networks/groups, 2009