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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.

English

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The challenges and benefits of alternative finance for SMEs

This chapter presents key findings and policy implications from the study. It discusses the new reality in SME finance, with changing conditions in bank lending and limitations to financing for new, innovative and fast-growing companies. It highlights the need to broaden the range of financial instruments for SMEs and entrepreneurs and illustrates the range of options available across the risk-return spectrum, including asset-based finance, alternative debt, hybrid tools and equity instruments. It briefly illustrates the main features of these instruments and comments on recent trends and policies to support their development across OECD and non-OECD countries. It concludes by discussing common obstacles to the SME sector to fully reap the benefits of a more diversified financial offer and suggests some key areas of policy action.

English

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