The SME Market

Small and medium-sized enterprises (SMEs) are the backbone, or perhaps the beating heart, of many economies. The vast majority of  companies within the European Union are SMEs and most would actually be classified as micro enterprises, as they generally employ fewer than ten persons, and have a turnover, or balance sheet value which is lower than €2,000,000.

Typically, such businesses are family-run operations. Like any other enterprise, they need access to finance to sustain and grow their operations, and continue to generate employment and value for all stakeholders. In reality, however, small businesses find it difficult to access alternative sources of finance and tend to rely primarily on bank finance, family funds and their own retained earnings. Such constraints severely limit their potential and the greater role they could play in growing the economy. 

The ‘risk capital’ which fuels the growth and expansion of larger businesses is simply not available to SMEs, which thus face a ‘financing gap’.  Whilst entrepreneurial owners are the dynamos that keep SMEs going, such people have little time for financial planning and moreover, their ability to provide collateral to support bank finance may also be restricted.

Succession statistics are stark. Though estimates vary, in many countries, a third of businesses do not successfully make the transition from the third generation to the next. Given the high incidence of family-run businesses, this reality raises a number of concerns about why businesses do, or do not, survive and the owners’ attitude to proper succession planning.

"...small businesses find it difficult to access alternative sources of finance..."

"...a third of businesses do not successfully make the transition from the third generation to the next."