Publications

Publications

New Approaches to SME and Entrepreneurship Financing: Broadening the Range of Instruments

New Approaches to SME and Entrepreneurship Financing: Broadening the Range of Instruments

New approaches to SME and entrepreneurship financing: Broadening the range of instruments highlights the fact that traditional bank finance poses challenges to SMEs, in particular to newer, innovative and fast-growing firms with a higher risk profile. The same applies to companies in transition such as those going through a change of ownership or control.

The report considers that diversified funding sources for SMEs can better serve the needs of firms at different stages of their life cycle, as well as help to mitigate systemic risk, strengthen the economy’s resilience to critical shocks and foster new sources of growth.

It maps the main features of a broad range of external financing techniques acting as alternatives to straight debt, including asset-based finance, alternative debt, hybrid instruments, and equity instruments.

The report indicates that it is now essential to address the obstacles that are limiting SMEs’ use of a broader range of financial instruments by:

  • Addressing the SME skills gap in finance;
  • Designing regulation that balances financial stability, investor protection and the development of innovative financing channels for SMEs;
  • Creating information infrastructures to improve credit risk assessment; and
  • Increasing participation of private actors in SME finance.

Credit Risk & Scoring