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.