SME financing in the euro area: New solutions to an old problem

SMEs’ access to finance remains a pressing problem in many parts of the euro area as SMEs largely rely on bank loans for funding. Our findings show that it is mainly the banks’ own refinancing costs in capital markets and their risk perceptions regarding SMEs which give rise to constraints. Of the steps taken to spur bank lending, the ECB’s LTROs seem to have had limited success. Securitisation of SME loans on the other hand has the potential to bridge the gap between SMEs’ funding needs and the availability of bank loans. Public-sector and market-based initiatives to improve SME financing are of great importance as well: for the former, private-sector involvement is crucial; as for the latter, overall success has been mixed so far.