Small and medium-sized enterprises and financing problems

Lack of liquidity, high taxation, low consumer demand and high operating costs are the most important problems faced by small and medium enterprises in our country. The problem of liquidity is the most important that is recorded, the treatment of which determines to a great extent the viability of companies in a negative economic climate that is a result of the economic crisis. The main causes of the liquidity problem are: • The lack of financing from the banks, which in recent years have virtually stopped financing the real economy, due to the severe financial constraints of the banking system. The economic downturn, the inability of banks to play their institutional role and financial uncertainty exacerbate the vicious circle of the crisis and stifle corporate efforts to operate sustainably. According to the SBA Fact Sheet of the European Commission, Greece shows the worst performance in the EU in the possibilities of financing SMEs and in fact this trend seems to be deteriorating over time. To the problem of lack of funding must be added the liquidity cost which is 2% higher than the EU average. as well as the policy of banks to seek collateral for real estate whose value has been devalued by 35-40% in the last 5 years. • The reversal of the terms of receipts – payments due to the financial crisis and uncertainty. Specifically, the data show that while the days of collection of receivables have increased, payments to suppliers are made faster. This simply means that companies have to pay their suppliers before they even receive the receivables from their customers. There is therefore a working capital opening that should normally be covered by non-existent financing. This problem becomes more acute and critical in the case of importation of materials or goods from abroad where most suppliers now require payment in cash and do not even accept letters of guarantee for good payment. • The limited possibilities of self-financing of the companies themselves due to the limitation of the economic activity and the profitability that would give them a boost in the cash flows. As it is known, our country is going through the sixth year of a great economic recession, it has lost 1/4 of its GDP and this crisis has hit SMEs in a disproportionately greater degree compared to large companies. • The limited access of SMEs to the use of financial engineering instruments (Financial engineering instruments FEI). These are financing of commercial banks in cooperation with national or European intermediaries such as ETEAN SA (Hellenic Fund for Entrepreneurship and Development), EIB (European Investment Bank) and EIF (European Investment Fund). These tools are used to finance SMEs, but a number of problems limit the accessibility of businesses to them. These problems concern: a) the bureaucratic and in some cases complex procedures that must be followed for the submission and evaluation of requests b) the lack of experience and information on the part of SMEs, but also guidance on alternative funding and selection options the most appropriate solution, depending on the particular characteristics of each company c) the restrictive tactics of banks and d) the need for guarantees and additional collateral on the part of companies. The role of SMEs is crucial for the national economy given that they employ 85% of private employment and produce 72% of the total value added of the economy (business economy).

Nikolaos I. Giannoulis