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June 06, 2017

EC published a report on addressing the information barriers in the small and medium enterprise (SME) funding market in the context of the Capital Markets Union. In addition, the EC Vice President Valdis Dombrovskis spoke about the European High-Level Principles on bank feedback on small and medium enterprise (SME) credit applications in Brussels.

The report maps national and regional initiatives to help small businesses identify a wider range of sources of finance as well as provide investors and lenders with reliable information about companies. This staff working document presents the results of a work stream, launched under the capital markets union action plan, to improve the conditions for finance to European SMEs. To help tackle information barriers in the SME funding market and improve access by innovative SMEs to alternative forms of finance, EC had also launched a call for proposals for a maximum amount of EUR 2.5 million under the Horizon 2020 program. This Call for Proposals will allow to support capacity-building projects to address information barriers in the SME funding market and increase the range of financing opportunities by drawing on these successful national initiatives.

SMEs often fail to get funding from banks, without receiving proper feedback as to the reason why, which hampers future attempts. The EC has been working to address this problem by getting the financial industry to do more to help small businesses navigate the complex financial landscape. Five major EU banking federations have now agreed to providing SMEs with the feedback they need so that they can ultimately increase their chances of getting loans. The EC Vice President Valdis Dombrovskis, responsible for Financial Stability, Financial Services and the Capital Markets Union, said "Thanks to today's agreement, SMEs will receive clear feedback on the reasons why their request for financing has been rejected, which will help them to better understand how to actually access the financing they need." 

While speaking in Brussels, Mr. Dombrovskis mentioned why the Capital Markets Union puts access to finance for small business at the heart of its Action Plan. The EC wants to help banks fulfill their role in financing the economy, including SMEs. The EC proposed, in its Banking Reform Package, to maintain the SME supporting factor and extend it to all loans to SMEs. Furthermore, last Tuesday, the Parliament and Council reached an agreement in principle on criteria for simple, transparent, and standardized securitization, which could unlock up to EUR 150 billion of additional funding to the real economy. The EC also published a guide to good practices for member states for connecting SMEs with prospective investors and lenders. This includes legislative measures, or the creation of funding hubs and matchmaking platforms, to give a few examples. These measures should help SMEs identify additional sources of finance and provide investors and lenders with reliable information about companies. In conclusion, he reiterated that funding small businesses will remain front and center of the Capital Markets Union program. This week's revised Action Plan will demonstrate the determination of EC to build a financial system that is responsive to the needs of its most important end-users—the European community of SMEs.

Related Links

Report (PDF)

High-Level Principles on Feedback by Banks (PDF)

Call for Proposals

EC Vice President on SME Credit Applications

Keywords: Europe, EC, Securities, SME, Action Plan, Capital Markets Union


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