New Approaches to SME and Entrepreneurship Financing

Broadening the Range of Instruments

image of New Approaches to SME and Entrepreneurship Financing

Bank lending is the most common source of external finance for many SMEs and entrepreneurs, yet has proven challenging to newer, innovative and fast growing companies, as well as to those undertaking important transitions in their activities or seeking to de-leverage and improve their capital structures.

This report maps a broad range of external financing techniques to address diverse needs in varying circumstances, including asset-based finance, alternative debt, hybrid instruments, and equity instruments. It further highlights key enabling factors for their development, discusses major market trends and obstacles to SME uptake, and suggests some key areas of policy action to overcome challenges to market development.


Asset-based finance for SMEs

This chapter describes the functioning of asset-based finance, which includes asset-based lending, factoring, purchase-order finance, warehouse receipts and leasing, and comments on how it can serve diverse SME financing needs in varying circumstances. The chapter compares the functioning mechanisms of the different asset-based tools, comments on the profile of firms that are suited for each one of them, and discusses the key enabling factors for their development. It then illustrates trends in asset-based finance across world regions and provides examples of regulatory reforms and policy programmes to support the development of asset-based financing for SMEs.



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