Market Gaps on Access to Finance - Bank of Valletta

Malta Business Bureau – <strong>Market</strong> gaps in access to finance
April 2013
C: Bank overdraft, credit line or credit cards overdraft
This type of finance is used by all “medium” SMEs, while “micro” SMEs used the overdraft facility
less frequently (61%, average: 74%). The use of this type of finance also varied across sectors. The
retail/distribution and professional services sectors had the highest usage rate (92% and 82%
respectively, average: 74%). Restaurants had the lowest rates of take up for this source of finance
(55%). Firms in the start up phase used this source of finance the least (50%, average: 74%).
D: Bank Loans
Bank loans were also a popular source of finance, used by 64% of total respondents. On the other
hand, 34% never looked into this type of finance – this may be attributable to a preference for own
financing (used by 89% of the firms interviewed).
All “Medium” SMEs used this type of finance, compared to half the micro enterprises. In terms of
sectors, the less frequent users of this type of finance were firms in the Life Sciences and ICT
sectors (50%, average: 64%). On the other hand, three-fourths of all manufacturing firms utilised
bank loans.
Start ups were less likely to utilise bank financing (30%; average: 64%), while emerging/ expansion
growth firms were the most frequent users (75% and 77% respectively; average: 64%).
E: Trade Credit
Trade credit was also one of the most prevalent sources of finance, with an average of 65% usage.
Micro firms were the less frequent users of trade credit (53%, average: 65%), while small
enterprises were the most frequent users (76%; average: 65%). The retail sector was more likely to
utilise trade credit (75%, average; 65%). On the other hand, emerging growth firms were less likely
to go for trade credit as a source of finance (25%, average: 65%).
F: Other loan (e.g. related company/ shareholders, family, friends)
This type of finance was not used by many firms (32%), and many firms from the interviewed
sample thought that this was not relevant to their firm. This type of finance was mostly used by
“medium” SMEs (53%; average: 32%).
The Life Sciences and ICT sector, as well as the other services, used this type of finance more
frequently (43% and 41% respectively, average: 32%), while manufacturing firms the least (19%,
average: 32%). Firms in the emerging growth stage were aided more often by this type of finance
(50%; average: 32%).
G: Leasing/ hire-purchase/ factoring
27% of respondents had utilised either leasing or hire-purchasing or factoring as a source of
finance. This was most likely to be the case with small firms (37%) and less likely to relate to micro
firms (18%), tourism/ hospitality firms (23%) and start-ups (20%).
H: Equity from other sources (including business angels, venture capital)
This proved to be one of the least used type of finance (only 4 respondents), with the main reasons
being that respondents did not consider this type of financing as relevant to them or not being
willing to dilute their ownership. None of the SMEs responding to the survey were listed, again since
the respondents deem this source of financing not relevant to their firm.
5.2.5 Q5: What was the reason for your request being rejected/ only partially
met/ your decision not to proceed further?
The chart overleaf summarises the reasons provided by respondents to explain why their
applications for financing were not taken forward, either by the authority/ institution, or by the
respondents themselves (a total of 15 responses). Refusals were generally linked to assistance
schemes part-financed by national and/ or EU funds. Some of the reasons provided include:
– Respondent did not meet application requirements
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