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Tough terms for small businesses

Small and medium-sized enterprises refers to firms of up to 250 workers each, but did you know that these so-called SMEs make up some 90% of employment in the OECD area? 

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Surely therefore, to get the economy moving again, the focus should be on these motors of activity!

Financing is one area to change. Unlike large global firms which continue to borrow at cheap rates of interest and even issue bonds, SME access to finance remains challenging. In fact, according to Financing SMEs and Entrepreneurs 2013: An OECD Scoreboard, SMEs generally faced higher interest rates for borrowing in 2011 than in 2009-2010. In fact, the interest rate spread between SMEs and large firms grew in many countries too.

An analysis of financial indicators from 25 countries between 2007-2011 shows that SME lending grew moderately in many developed economies, and that there was a more pronounced increase in financing of small companies in emerging economies.

The sovereign debt crisis is likely to have led to a further deterioration in the lending activities of banks in 2012-2013, the report says. There was a flicker of recovery in investments in venture and growth capital, but overall loans remained below 2007 pre-crisis levels.

Financing SMEs and Entrepreneurs 2013: An OECD Scoreboard provides detailed country profiles of financial conditions for SMEs in 25 countries.

See www.oecd.org/industry/smes

©OECD Observer No 294, Q1 2013