New debt market instruments have emerged in recent years that will increase funding flows to small and medium-sized enterprises (SMEs) and mid-caps, allowing these firms to access more flexible and in some cases less expensive financing alternatives to bank loans, which companies in this market segment continue to rely on, says Moody's Investors Service in a report published today.

"Alternative funding instruments and channels will help small and medium-sized businesses finance new spending or refinance existing debt in an environment where European banks continue to apply a size premium on small loans," states Marie Diron, a Senior Vice President of Credit Policy at Moody's. "However, bank lending is still crucial for SMEs and will likely remain so for the foreseeable future. The overall volume of debt channelled through these new mechanisms, while growing, remains small," observes Ms. Diron.