Moving Beyond State Aid: How Can Public Policy Better Support SME Financing? College of Europe Policy Brief #18.16, November 2016

Hornik, Joanna and Watfe, Gibran (2016) Moving Beyond State Aid: How Can Public Policy Better Support SME Financing? College of Europe Policy Brief #18.16, November 2016. [Policy Paper]

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Abstract

Executive Summary > Across the EU, state aid granted to SMEs has declined since 2009. Simultaneously, SMEs have adjusted their financing behaviour and reduced their use of state aid instruments. > To substitute for the decreased state financing, SMEs have made more use of financing by banks and trade financing. This reinforced the predominant reliance on bank loans. > Market financing continues to play a minor role for SME financing. A genuine Capital Markets Union could help SMEs diversify their funding sources. > An effective EU public policy in support of SME financing should adopt a more risk-based approach and focus on removing structural barriers to investment.

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