24 November 2015

FEE/ESBG/UEAPME: EU associations trio strongly involved with SMEs forge common CMU position

FEE, ESBG and UEAPME provide a set of ideas to improve access to finance for SMEs under the Capital Markets Union. The trio says to be deeply committed to supporting Commission CMU work and calls on policymakers to recognise that typical SMEs won’t get financing they need from capital markets.

ESBG, FEE and UEAPME present the following common ideas on improving access to finance for all SMEs under the Capital Markets Union:

• Very few European SMEs are the high-tech start-ups and fast growing companies that will be attractive to capital market investors. ‘Regular’ SMEs cannot and will not get the financing they need from capital markets, whereas they are the backbone of the European economy. Only 1% of European companies have more than 50 employees, whereas 92% have less than 10 employees. Notwithstanding the status quo, Europe needs to tap into its entrepreneurial and innovative potential to be able to achieve economic growth.

• The overwhelming majority of SMEs will remain reliant on debt financing by banks as their primary source of funding. As a lot of SMEs could benefit from better capitalisation, alternative sources can play a useful and complementary role in finding finance.

• They welcome the EC’s initiative to modernise the Prospectus Directive with a proportionate regime for SMEs.

• They call on EU institutions to also focus on improving the capacity of the banking sector to lend to SMEs. Especially since the capital requirements put on banks by Basel III and national bank levies strain their lending capacity. In this regard they emphasise that different banks’ business models should be dealt with differently, and regulation should be applied in a proportional manner, especially bearing in mind local banks. They emphasise the need for comprehensive impact assessments that take into account the existing national capital markets structures that are efficient as well as the diversity of the SME sector.

• It is crucial that SMEs are well advised and prepared when seeking funding. Professional accountants are well placed to get SMEs investment-ready with solid business planning and financial and credit management. They can help SMEs in identifying the funding sources that best suit their profile and needs and help them with successful applications. Accountants also play an essential role in improving the financial literacy of SMEs’ management. Improving accessibility to funding for SMEs is the core mission of both accountants and banks.

• They welcome the work to reignite the securitisation market, although securitising SME loans will not be self-evident. Relaunching securitisation in Europe in a transparent and standardised way that reduces complexity can serve as a complementary, functioning market that allows banks to boost lending.

• They commend the Commission’s efforts to reflect on tax treatments of equity as too often tax systems and State aid programmes do not favour that companies develop equity. Any measure that encourages SMEs to increase their equity ratio e.g., by keeping profits in the company, would increase access to finance and a better allocation of funds.

• They support the measures to improve the creditworthiness of SMEs. In order to attract financing, SMEs need to improve the quality, availability and comparability (also cross-border) of the relevant information for potential investors. However, the databases that banks maintain might not be a suitable source, as they all have different models. Improving their credit information should not pose an unnecessary administrative burden on SMEs beyond what each Member State already requires. When information is not public, SMEs should be able to control who can access this.

Full press release

Full position paper

 

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