European SME Sector – Banks are a Major Hurdle for Growth

Nov. 1, 2013
According to a recent study conducted by the European Central Bank (ECB) one out of nine SMEs claims that they do not have any chance to finance their growth with a bank loan. To get stronger in your market, forget about the banks. They don’t understand your true needs!

According to a recent study conducted by the European Central Bank (ECB) one out of nine SMEs claims that they do not have any chance to finance their growth with a bank loan. 

The Brits in Europe have usually a bit different approach to continental Europe.

Bank of England grants for every pound of loan to an SME, 10 pounds of bank financing with special conditions. It makes sense to have a multiplier, because just lending money 1:1 from central bank to financing institutes alone is not enough. The banks in Europe, so vital for the economy and SMEs, don’t seem to get over their huge challenges on their balance sheets without fresh money. Fortunately ECB is focusing on this issue, unfortunately until now with little tangible action.

At the same time large corporations like Siemens recently closed a refinancing deal for over 3bioUSD with Commerzbank, Deutsche Bank and JP Morgan. The offer from the banks was 5.7bioUSD!

Good for them and for Siemens.

However, SME sector is not having the same chances!

Today banks are living in their own world and trying to solve their problems. They are not actively participating in financing industrial companies.

The real economy should live its own life too, because the gap between a banker and real life industrial entrepreneur seems to get wider year after year.

Europe’s SME sector needs new ideas to fund their growth plans. Private Equity Groups are an alternative, however their relatively short-term investment cycle doesn’t fit to every entrepreneurs view on partnership.

Good partners for SMEs are now hard to find and partners with money and industrial interests to develop businesses further even harder!

Nothing beats a strong balance sheet, however SMEs could have various complementing approaches to solve their growth challenges.

Here are some that small European companies have been rather hesitant to consider:

  • Looking over country borders for business partners with best possible operational and strategic fit
  • Joint Ventures
  • Production outsourcing, not necessarily to far away countries, but with the aim to gain flexibility in supply chain
  • Attract and talk with MBI (Management – Buy-In) candidates, usually they have both money to invest and experience
  • Increased pace and accuracy in whatever the companies does, like order handling, production times, engineering

To get stronger in your market forget about the banks.

They don’t understand your true needs!

The real power comes from knowing your true strengths, weaknesses, opportunities and threats and finding an SME business partner who shares your vision. 

About the Author

R. Paul Vuolle Blog | CEO

R. Paul Vuolle's blog "The SME's Guide to European Manufacturing," has moved. You'll find his latest ideas and commentary on SME European Manufacturing on IndustryWeek's IdeaXchange. 

You'll find more articles written by Paul at

R. Paul Vuolle, CEO of Bellevue SME Advisors GmbH in Switzerland and Germany, works actively with small and medium (SME) size manufacturing companies in Europe in SCM/Outsourcing, logistics, turnaround and restructuring, market expansion, as well as succession planning and financing. He also frequently supports technology start- ups in building up their business. 

Paul has over 20 years operational industry experience in engineering, electronics, industrial automation, building automation, investment goods like electrical drives, automatic test & measurement systems, HV Transformer production systems. During his career he has worked in manufacturing industries in supply chain management, outsourcing, logistics, production, R&D and successfully selling to international large key accounts. Paul has also run a sizeable amount of M&A transactions in numerous countries around the world.

He has built up his experience working in various leadership positions and functions in large corporations, such as ABB, and having executive positions in medium-size family companies and as a technology entrepreneur.

Paul is MSc. E.E. from Swiss Federal Institute of Technology in Zürich as well as BSc.E.E. from Helsinki Institute of Technology.

Paul is a long time member of IEEE and of its Industrial Applications Society.

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