Policy focuson SMEs’ access to external financing sourcesis driven by the premise that SMEs are often more financially constrained than large firms (Beck and Demirguc-Kunt, 2006), even though they are generally regarded to be important contributors toeconomic growth. SMEs account for approximately 99.8% of all enterprises in the non-financial business sector andcreate 67% of total employment in the EU. Together, SMEs producemore than half of value added in the EU (Kraemer-Eis et al., 2017). The financial constraints facing SMEs are typically attributed to market and institutional failures.
For example, small firms may be unable to put forwardhigh quality collateral, they may have fewer administrative resources to provide adequate reporting and transparency about their credit-worthiness, or they may lack the brand equity that larger firms enjoy amongst creditors. These issues are often aggravated for young innovative enterprises, which mainly rely on equity finance to fulfil their growth potential (see Kraemer-Eis et al, 2016b). All of these factors contribute to the problem of asymmetric information between SME sand their financers, which in turn leads to credit rationing and sub-optimal lending to viable SMEs (Darvas, 2013; Kraemer-Eis, Schaber and Tappi, 2010; Öztürk and Mrkaic, 2014).