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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.

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Foreword and AcknowledgementsAcknowledgements

The pressing need to enhance the role of small and medium-size enterprises (SMEs) and entrepreneurs as drivers of innovation, job creation and growth is increasingly recognised by governments as they pursue efforts to put the global economy back on track. This means addressing both cyclical constraints and structural barriers. Access to finance represents a longstanding hurdle to entrepreneurship and SME growth, which was exacerbated by the global financial and economic crisis. Bank lending to SMEs and credit conditions have still not recovered to pre-crisis levels in many countries, and evidence suggests that credit restrictions for SMEs are likely to persist for the foreseeable future.

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