Market Gaps on Access to Finance - Bank of Valletta

Malta Business Bureau – <strong>Market</strong> gaps in access to finance
April 2013
Table 4: Firm Owners
Start-up
Emerginggrowth
Page | 45
Domestic
growth
Expansion
-growth Total
One Owner 60% (6) 50% (2) 20% (15) 62% (8) 30% (31)
Family/ Entrepreneurs 30% (3) 0% (0) 67% (50) 31% (4) 56% (57)
Other firms/ Business
Associates 10% (1) 50% (2) 13% (10) 8% (1) 14% (14)
Base: All Respondents
The table above shows that the most common type of ownership is the family business, which is
followed by the “one owner” category. None of the firms that were interviewed are publicly listed
on the stock exchange – as discussed in Section 3.4.5 this is very often the case with the majority
of small and micro size firms. The results also reflect a common belief among SMEs that obtaining
an equity injection from other business partners is not relevant to their business 97 . The firms
having a business associate amount to 14% of all the firms interviewed. As expected, larger firms
are more likely to move away from a one-owner structure. A family-run business was the most
prominent ownership for all firm sizes and all economic sectors.
The data in the table above also shows that expansion-growth firms have a higher tendency for a
one-owner structure (64%; average: 30%), possibly indicating that local firms are able to survive
and grow despite internal funds being reliant on one individual only. The family/ entrepreneurs
structure is mostly found in the domestic-growth stage (67%; average: 56%). As explained earlier,
the involvement of other firms/ business associates is quite limited across the board (14% across all
stages).
In terms of sectoral analysis, the family ownership structure emerged as the preferred structure in
all sectors. However, the “other services” sector was more likely to incorporate other firms/
business associates in their ownership structure (29%, average: 14%) – this was especially the case
with professional firms. On the other hand, none of the Life Sciences/ICT firms interviewed had any
third party involvement (i.e. from other firms or business associates).
The size of the firm was also a determinant of firm ownership structure, as “Medium” SMEs are less
likely to have a one-man ownership structure (13%, Average: 30%). In fact, these firms were more
likely to take into consideration third party equity from other firms/ business associates (27%,
average: 14%).
5.2.2 Q2: Can you kindly provide an indication of the current source/s of your
funding?
This question gives an indication of the type of financing currently being adopted by local firms,
independently of the purpose for funding. Each respondent could provide more than one reply. It is
pertinent to note that the “Family/friends” in this question does not overlap with the previous
ownership structure question. In this question, interviewees were asked whether families/friends
that were not owners from the inception of the business have provided additional finance.
97 European Central Bank (2012), SAFE tables – 2011 (Excel file). For 80% of Maltese respondents, an equity injection from
third parties as an additional source of financing was never relevant to their firm. The EU27 average was c. 79%, mainly due
to the responses provided by a number of other countries (> 70% for Austria, Bulgaria, Czech Republic, Germany, Ireland,
Italy, Latvia, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and the UK). A greater willingness to accept
third party equity was observed in the Nordic countries (non-EU Norway – 26%, Denmark and Sweden – 35%), Lithuania (46%)
and France (48%).