Authors: Christos Grose, Maria Argyropoulou, Andreas Tilios

Title: Financing tools for SMEs. The impact of global financial crisis on SMEs in Europe and the role of EU funding programs

Abstract

Small and medium-sized enterprises (SMEs) constitute the largest part of the enterprises currently operating in the European Union. It is estimated that there are over 24.5 million small and medium-sized enterprises operate currently in the European Union. In the last decades SMEs with the liberalization of markets have faced greater competition in the markets rendering necessary the development of tools that would allow to compete international counterparts.

The paper analyses financing tools for SMEs with a focus on the Greek market. Through secondary data and the use of questionnaires inferences are made out towards the current use of financial tools by SMEs and the unexploited opportunities existing in the region. The traditional methods of financing through banking products and loans are analysed while the alternative ways of SMEs financing are also analyzed, followed by an extensive analysis of the global financial crisis and how it has affected SMEs financing in the European Union.

The need for new funding resources has led businesses to seek capital through alternative pathways. The European funding mechanism and financing
products through the European Central Bank are presented as well the way these
financing programs helped SMEs recover after the global financial crisis. Last but not
least a survey of Greek SMEs will be presented.

The conducted survey analyzed the ways in which SMEs are financed in Europe,
the impact of the global financial crisis on them, and the important role of the
European Union through European funding programs in addressing it.
The main finding is that Greek SMEs are mainly dependent on bank borrowing to
achieve their investment plans. Despite the difficulties in raising financing a very small percentage of these companies sought new funding sources and the majority of businesses addressed the effects of the crisis using their own funds.

The European Union's intention to support SMES during the financial crisis has also
been highlighted through the survey. EU considers SMEs as the backbone of the
economies and continuously seeks ways for supporting them. The EU has created several funding programs relevant to all areas of activity of SMEs and particularly the areas of innovation, youth entrepreneurship and startups. Nonetheless, the majority of businesses are unfamiliar with European funding programs and only a small percentage have used any of these programs to implement any investment. The lack of expertise and qualified personnel to Greek businesses proves to be an important factor for not adopting new forms of funding, such as those of the European Union. The lack of adoption of new modes of financing by Greek SMEs was one of the most important reasons Greek businesses faced greater difficulties during the financial crisis and their recovery was slower relative to other European countries. We conjecture that countries that have substantially supported their SMEs have been able to recover faster and cope with the adverse conditions of the financial crisis, a finding associated with the need to further support SMEs in adopting new funding instruments.