A comparative analysis of the US and EU retail banking markets - Wsbi

According to the Observatory of European SMEs 348 ,
while the importance of bank borrowing does vary
between different countries in Europe, the majority
of SMEs depend on bank financing and this state
of affairs is not expected to change in the near
future 349 . It adds further that there seems to be a lack
of alternative funding sources.
In terms of the proportion of SME funding in Europe
that is equity finance, this can be assessed by looking
at information on the equity ratio of smaller
enterprises included in the Bach database of the
European Commission 350 . The data reveals that
there is no clear link between the equity ratio and
firm size. In some countries (like Austria, Denmark,
Finland, Germany, and Spain) the equity ratio of
small enterprises is lower than in medium-sized
enterprises. In other countries it is higher (like
Belgium and France) 351 .
Regarding bank financing, the Grant Thornton
European Business Survey 352 gives an indication of
the different types of debt finance used by SMEs in
Europe (see table P in table annex). In the majority of
Member States these enterprises use mainly bank
loans. In terms specifically of bank financing, apart
from bank loans SMEs use overdrafts to finance their
activities. In general, overdrafts are more expensive,
but often preferred by enterprises because of
their higher flexibility 353 . Nevertheless, the use of
loans in European Member States usually exceeds
that of overdrafts.
Leasing is increasingly used in Europe. The average
penetration of leasing is estimated to be about 12%
in the European Union, and this form of financing
seems to be particularly important in Italy, Sweden,
Germany, United Kingdom and Portugal. In Spain,
France, Luxembourg, the Netherlands, and Portugal
leasing is used more often than overdrafts.
90%
Graph 18: Percentage of SMEs using debt financing in EU-15, by country
80%
70%
60%
50%
40%
30%
20%
10%
0%
Belgium
Denmark
■ Overdraft
■ Leasing
■ Factoring
■ Bank Loan
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finalnd
Sweden
United Kingdom
European Union
Source: Grant Thornton, The European Business Survey, London, 2001.
348 The Observatory of European SMEs was established by the Commission in December 1992 in order to improve the monitoring of the economic performance
of SMEs in Europe. Its task is to provide information on SMEs to policy-makers, researchers, economists and SMEs themselves.
349 “SMEs and Access to Finance”, 2003 Observatory of European SMEs, European Commission.
350 This database includes balance sheet details for enterprises in a large number of Member States.
351 This commentary comes from “SMEs and Access to Finance”, 2003 Observatory of European SMEs, European Commission.
352 The Grant Thornton European Business Survey reports on the business expectations and trends among small and medium sized enterprises in all 15 EU
countries plus Malta, Norway, Poland, Switzerland and Turkey. Conducted by Grant Thornton International and Business Strategies Ltd., it has been produced
annually since 1992.
353 “Enterprises’ access to finance”, Commission Staff Working Paper, European Commission, October 2001.
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