Market Gaps on Access to Finance - Bank of Valletta

Malta Business Bureau – <strong>Market</strong> gaps in access to finance
April 2013
Figure 6: Current sources of finance
%age of respondents
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
89%
A: Own
Financing
9%
B:
Family/Friends
Base: each percentage is based on total sample size
70%
C: Overdraft,
credit line, or
credit cards
The figure above confirms the reliance of most firms on traditional sources of finance - “own
financing” (89%), overdraft facilities (70%) and bank loans (47%). Financing from family/ friends
(who are not also owners) was a less utilised source of financing with only 9% of respondents
currently using this type of finance. The “other” category is made up of respondents who receive
funding from the parent company and shareholder’s loans.
An analysis by size resulted in more prevalent financing from overdraft facilities and bank loans
from medium firms (93% for both, average: 70% and 47% respectively). On the other hand, “micro”
firms were less likely to opt for bank loans and trade credit (31% and 37% respectively, average;
47% and 50%).
The main differences when comparing firms by sector are highlighted below:
- Almost all firms in Life Sciences, ICT and manufacturing firms replied “yes” to using own
financing, (average: 89%)
- The manufacturing sector tended to prefer more loan financing when compared to other
sectors (67%, average: 47%)
- Firms operating in the retail/distribution sector tended to have lower reliance on own
financing (79%; average: 89%), but this was generally set off by greater reliance on
overdraft financing (83%, average: 70%)
- Restaurants were less likely to utilise overdraft financing compared to the average results
(55%, average: 70%)
- Professional services have less dependence on bank loans (33%, average: 47%) and trade
credit (17%, average: 50%). This is also a reflection of the low capital intensity of this
sector.
The following differences emerge when comparing firms by their growth stage:
- Start up firms are more inclined towards financing from family/friends (30%; average: 9%),
while opting for less bank loans (30%; average: 47%) and overdraft facilities (50%; average:
70%)
- Firms in their expansion growth take up less overdraft facilities (54%; average: 70%) and
tend to use trade credit less frequently (38%; average: 50%) than other firms.
Page | 46
47%
D: Bank Loans
(excl. OD and
credit lines)
50%
4%
E: Trade Credit F: Other