OECD 2015 - Macroeconomia (2024)

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Consult this publication on line at http://dx.doi.org/10.1787/fin_sme_ent-2015-en.This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases.Visit www.oecd-ilibrary.org for more information.Financing SMEs and Entrepreneurs 2015An OECD SCOrEbOArDFinancing SMEs and Entrepreneurs 2015An OECD SCOrEbOArDContentsChapter 1. Reader’s guide: Indicators and methodologyChapter 2. Recent trends in SME and entrepreneurship financeChapter 3. Non-performing loans: Insights from the Scoreboard on SME financeChapter 4. Country profiles of SME and enterpreneurship financing 2007-2013• Austria• Belgium• Canada• Chile• China• Colombia• Czech Republic• Denmark• Estonia• Finland• France• Greece• Hungary• Ireland• Israel• Italy• Japan• Korea• Mexico• The Netherlands• New Zealand• Norway• Portugal• Russian Federation• Serbia• Slovak Republic• Slovenia• Spain• Sweden• Switzerland• Thailand• Turkey• United Kingdom• United StatesAnnex A. Methodology for producing the national scoreboardsAnnex B. Standardised table for SME finance data collectionAnnex C. Standardised format for reporting government policy programmesiSbn 978-92-64-22896-2 85 2015 01 1 PFinancing SMEs and Entrepreneurs 2015 An OECD SCOrEbOArDFinancing SMEs and Entrepreneurs 2015An OECD SCOrEbOArDThis work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries.This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.Please cite this publication as:OECD (2015), Financing SMEs and Entrepreneurs 2015: An OECD Scoreboard, OECD Publishing, Paris.DOI: http://dx.doi.org/10.1787/fin_sme_ent-2015-enISbn 978-92-64-22896-2 (print) ISbn 978-92-64-22897-9 (PDF)Financing SMEs and EntrepreneursISSn 2306-5257 (print) ISSn 2306-5265 (online)The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West bank under the terms of international law.Photo credits: Cover ©Shutterstock/roman GorielovCorrigenda to OECD publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm.© OECD 2015You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of the source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to rights@oecd.org. requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at info@copyright.com or the Centre français d’exploitation du droit de copie (CFC) at contact@cfcopies.com.FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015 3FOrEWOrDForewordMore than half a decade after the onset of the global economic and financial crisis, start-ups and small firms continue to face important challenges in obtaining finance, a key ingredient to their development. As governments around the world strive to achieve growth that is sustainable and inclusive, there is a pressing need to find solutions that enable small and medium-sized enterprises (SMEs) and entrepreneurs to fulfil their role in boosting investment, creating jobs and achieving social cohesion.With Financing SMEs and Entrepreneurs 2015, the OECD provides a solid foundation for evidence-based policies to foster SME access to finance. This fourth edition of the Scoreboard makes important progress in advancing this agenda. It provides information on debt, equity, asset-based finance and framework conditions for SME and entrepreneurship finance, complemented with a review of recent policy measures to support SME finance in 34 countries.The data show that access to finance remains problematic in many countries. Financing conditions generally improved, especially with respect to the average interest rates charged to SMEs, although they remain tight in most countries. However, despite this positive development, the total outstanding stock of SME loans shrank in a number of countries in 2013, and has still not recovered to 2007 levels in countries as diverse as Greece, Italy, Ireland, Portugal, the United Kingdom and the United States. The OECD is continuing to support governments as they seek to reverse this trend.In 2013 and 2014, governments were particularly active in their efforts to foster SME access to finance. The provision of credit guarantees continues to be the most widely used policy instrument in this regard. In addition, many new programmes were introduced, with a noticeable shift of policy attention towards high-potential innovative firms. Indeed, many governments launched new initiatives to stimulate venture capital investments and foster innovation in SMEs through tax incentives; they have also modified existing direct lending or credit guarantee schemes to target innovative SMEs. The thematic chapter of this edition of Financing SMEs and Entrepreneurs 2015 focuses on SME non-performing loans (NPLs). It highlights the detrimental effects that high and increasing NPLs have on SME lending, GDP growth and job creation. In particular, NPLs pose important risks to economic recovery in countries that experienced severe economic difficulties in recent years, such as Greece, Hungary, Italy, Portugal, Serbia and Spain. The chapter underlines the difficulties of meaningful analysis of NPLs due to multiple definitions and widely different practices in the classification of loans. It emphasises the importance of making progress in harmonisation in order to better understand this phenomenon.This edition of the Scoreboard also makes significant progress in data harmonisation and the expansion of coverage to alternative finance instruments for SMEs. The OECD will continue to assist FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 20154FOrEWOrDgovernments in understanding SME finance trends, and to underpin the development of appropriate policy responses. Our common goal is a financial system that serves the needs of all enterprises, and enables them to invest, grow and contribute to sustainable and inclusive growth. Angel Gurría, OECD Secretary-GeneralFInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015 5ACknOWlEDGEMEnTS Acknowledgements The development of Financing SMEs and Entrepreneurs 2015 was made possible thanks to the efforts of country experts from participating OECD member and non-member countries, who provided information for the country profiles.Country ExPErt tEaMAustria Thomas Saghi Federal Ministry of Science, Research and EconomyBelgium Mahungu Shungu Johan WestraFederal Ministry of Economy, SMEs, self-employed and energyFederal Ministry of Economy, SMEs, self-employed and energyCanada Richard Archambault Industry CanadaChile Gerardo Puelles Ministry of Economy and Small EnterprisesChina (People’s Republicof)Wu BaoRenyong ChiYantai ChenChina Institute for Small and Medium-sized Enterprises China,Institute for Small and Medium-sized Enterprises China Institute for Small and Medium-sized Enterprises Colombia Nicolás PalauAdriana Rueda PerezMinistry of Commerce, Industry and Tourism Ministry of Commerce, Industry and TourismCzech Republic Dagmar Vránová Ministry of Industry and TradeDenmark Kevin Reinholdt Christensen Business and Growth MinistryEstonia Karel Lember Ministry of economic affairs and communicationsFinland Jari HuovinenPertti ValtonenConfederation of Finnish IndustriesMinistry of Employment and the EconomyFranceJean-Pierre VilletelleMarie-Laure WyssBanque de FranceGeneral Directorate for Competitiveness, Industry and Services Greece Timotheos Rekkas Hellenic Ministry for Development and CompetitivenessHungary Kármen Billo Ministry for National EconomyIreland Paul Mooney Department of FinanceIsrael Arbel Levin Nir Ben-AharonSmall and Medium Business Agency, Ministry of EconomySmall and Medium Business Agency, Ministry of Economy Italy Antonio De Socio Salvatore ZecchiniBank of ItalyMinistry of Economic DevelopmentJapan Ryohei Mukai Small and Medium Enterprise Agency, Ministry of Economy, Trade and IndustryKorea Changwoo Nam Korea Development InstituteMexico Adriana Tortajada Ministry of EconomyNetherlands Irma Tems Ministry of Economic AffairsNew ZealandWayne ChurchMike ShaffreyMinistry of Business, Innovation and EmploymentMinistry of Business, Innovation and EmploymentNorway Eirik Knutsen Statistics NorwayPortugal Nuno Goncalves Office of the Secretary of State of Economy and Regional DevelopmentRussian FederationNatalia MinaevaEvgeny TcherbakovMinistry of Economic Development VnesheconombankSerbia Maja GavrilovicBiljana SavicIvana DjurovicNational Bank of SerbiaNational Bank of SerbiaNational Bank of SerbiaSlovak Republic Daniel Pitonak National Agency for SME DevelopmentSlovenia Tine Janzek Bank of SloveniaFInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 20156ACknOWlEDGEMEnTS Spain Víctor García-Vaquero Bank of SpainSweden Johan Harvard Ministry of Enterprise, Energy and CommunicationsSwitzerland Markus Willimann State Secretariat for Economic AffairsThailand Dhidap*rn Dharmasarga Bank of ThailandTurkeyUf*ck AcarUtku MacitKOSGEBMinistry of Science, Industry and TechnologyUnited Kingdom Alex Turvey British Business BankUnited States Giuseppe Gramigna United States Small Business AdministrationThe design of the Scoreboard benefits from the inputs of delegates of the OECD Working Party on SMEs and Entrepreneurship and members of its Informal Steering Group on SME and Entrepreneurship Financing, chaired by Professor Salvatore Zecchini. In particular, the contribution of noritaka Akamatsu (Asian Development bank), Helmut kraemer-Eis (European Investment Fund), Michel Cottet and José Fernando Figueireido (European Association of Mutual Guarantee Societies), Gianluca riccio (OECD business and Industry Advisory Committee), Jeffrey Alves (International Council for Small businesses) are acknowledged, as participants in the WSPMEE’s Informal Steering Group on SME and Entrepreneurship Financing. The report was also enriched by exchange with Matthew Gamser, Head of the SME Finance Forum, a collaborative knowledge sharing platform managed by the International Finance Corporation, in the framework of the G20 Global Partnership for Financial Inclusion.This report was prepared by kris boschmans, Policy Analyst, OECD Centre for Entrepreneurship, SMEs and local Development (CFE), under the supervision of Miriam koreen (Deputy Director, CFE). lucia Cusmano (Senior economist, CFE) and Virginia robano (Policy Analyst, CFE) contributed to the report. Sonˇa Fazikova provided technical support.FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015 7TAblE OF COnTEnTS table of contentsTable of contentsExecutive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17acronyms and abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Chapter 1. Reader’s Guide: Indicators and methodology . . . . . . . . . . . . . . . . . . . . . . . . . 23Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Government policy measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Cross-country comparability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Recommendations for data improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Chapter 2. Recent trends in SME and entrepreneurship finance . . . . . . . . . . . . . . . . . . 29Business environment and the macroeconomic context . . . . . . . . . . . . . . . . . . . . . . . 30Lending to SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Credit conditions for SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Equity financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Asset-based finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Payment delays, bankruptcies and non-performing loans . . . . . . . . . . . . . . . . . . . . . . 55Government policy responses in 2013-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Summing up and looking ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66references . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Chapter 3. Non-performing loans: Insights from the scoreboard on SME finance . . . 69Defining non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70Trends in NPLs over 2007-13: evidence from the Scoreboard . . . . . . . . . . . . . . . . . . . . 73Evidence from the economic literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77Non-performing loans: the case of Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82Non-performing loans: the case of Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Conclusions,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87references . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88Chapter 4. Country profiles of SME and entrepreneurship financing 2007-13 . . . . . . . 91Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124China (People’s Republic of) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140Colombia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 20158TAblE OF COnTEnTSCzech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167Estonia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191Greece . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287Serbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296Slovak Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310Slovenia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369Annex A. Methodology for producing the national scoreboards. . . . . . . . . . . . . . . . . . . . . 383Annex B. Standardised Table for SME Finance Data Collection . . . . . . . . . . . . . . . . . . . . . . 401Annex C. Standardised Format for reporting government policy programmes . . . . . . . . 403tables 1 .1 . Core indicators in financing SMEs and entrepreneurs 2015 . . . . . . .,. . . . . . . . . . 25 2 .1 . Real GDP Growth in Scoreboard countries (%), 2007-13 and 2014-15 forecast . . 31 2 .2 . Inflation in Scoreboard countries (%), 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2 .3 . Growth of SME business loans, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2 .4 . Share of SME loans in total business loans, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . 38 2 .5 . Trends in SME loan shares and credit market scenarios, 2012-13 . . . . . . . . . . . . 39 2 .6 . The share of short term SME loans as a proportion of all SME loans, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 2 .7 . Trends in SME loan rejection rates: 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2 .8 . ECB Survey on SME access to finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 2 .9 . Seed and early stage venture capital investments, later stage venture capital investments and growth capital investments, 2008-13 . . . . . . . . . . . . . . . 50 2 .10 . New production in leasing: 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53FINANCING SMES AND ENTREPRENEURS 2015 © OECD 2015 9TABLE OF CONTENTS 2 .11 . Factoring volumes, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 2 .12 . Trends in payment delays 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 2 .13 . Trends in bankruptcies 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 2 .14 . Non-performing loans as a percentage of all SME loans, 2007-13 . . . . . . . . . . . . 58 2 .15 . Government loan guarantees for SMEs, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 2 .16 . Government policy responses to improve SME access to finance, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 3 .1 . Definitions of non-performing loans by country . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 3 .2 . NPLs as a percentage of loans, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 3 .3 . A break-up of NPLs in Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 4 .1 . Distribution of firms in Austria, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 4 .2 . Venture and growth capital investments in Austria, 2007-13 . . . . . . . . . . . . . . . . 96 4 .3 . Government Loan Guarantees in Austria, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . 98 4 .4 . Financing for exporting SMEs by Oesterreichische Exportfonds GmbH . . . . . . . . 98 4 .5 . Risk capital initiatives, Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 4 .6 . Scoreboard for Austria, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 4 .7 . Definitions and sources of indicators for Austria´s Scoreboard . . . . . . . . . . . . . . 102 5 .1 . Distribution of firms in Belgium, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 5 .2 . Demand for bank finance during previous 12 months in Belgium, percentage of SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 5 .3 . Problems encountered when applying for a bank loan in Belgium, percentage of SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 5 .4 . Reasons why some firms did not request bank finance in the previous 12 months in Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 5 .5 . The take-up of non-bank financing instruments in Belgium . . . . . . . . . . . . . . . . 107 5 .6 . Outstanding stock of leasing (based on the customer portfolio of the Belgian Leasing Association) and factoring turnover, 2007-13 . . . . . . . . . . 107 5 .7 . Venture and growth capital in Belgium, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 5 .8 . Direct loans, government guarantees and guaranteed loans in Belgium, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 5 .9 . Scoreboard for Belgium, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 5 .10 . Definitions and sources of indicators for Belgium’s scoreboard . . . . . . . . . . . . . . 112 6 .1 . Distribution of firms in Canada, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 6 .2 . Value of disbursem*nts in Canada, 2012-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 6 .3 . Venture and growth capital in Canada, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 6 .4 . Scoreboard for Canada, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 6 .5 . Definitions of indicators for Canada’s Scoreboard . . . . . . . . . . . . . . . . . . . . . . . . . 122 7 .1 . Distribution of firms in Chile, commercial year 2012 . . . . . . . . . . . . . . . . . . . . . . . 124 7 .2 . Rate of growth of the stock of total business loans in Chile . . . . . . . . . . . . . . . . . 125 7 .3 . Rate of growth of the stock of SME business loans in Chile . . . . . . . . . . . . . . . . . . 126 7 .4 . CORFO Long-term Credit Line Programs for Risk Capital Fund Managers (up to December 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 7 .5 . CORFO Venture Capital Fund Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 7 .6 . CORFO Resolving Insolvency Indicator, Doing Business Report . . . . . . . . . . . . . . 130 7 .7 . Ratio of non-performing SMEs business loans in Chile . . . . . . . . . . . . . . . . . . . . . 131 7 .8 . Scoreboard for Chile, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 7 .9 . Definitions,of indicators for Chile’s Scoreboard . . . . . . . . . . . . . . . . . . . . . . . . . . . 13600_852015011_001-022.indd 9 14/04/2015 14:02:11FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 201510TAblE OF COnTEnTS 8 .1 . Distribution of firms in China, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 8 .2 . Scoreboard for China, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 8 .3 . Definitions of indicators for China’s Scoreboard . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 9 .1 . Distribution of firms in Colombia, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 9 .2 . Evolution of Microcredit in Colombia, 2010-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 9 .3 . Scoreboard for Colombia, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 9 .4 . Definitions and sources of indicators for Colombia’s Scoreboard . . . . . . . . . . . . . 157 10 .1 . Distribution of firms in the Czech Republic, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 159 10 .2 . Venture capital and growth capital in the Czech Republic, 2007-13 . . . . . . . . . . . 161 10 .3 . Operational Programme Enterprise and Innovation – amount of funds paid, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 10 .4 . Guarantees issued and loans guaranteed in the Czech Republic, 2007-13 . . . . . 162 10 .5 . Scoreboard for the Czech Republic, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 10 .6 . Definitions and sources of indicators for the Czech Republic’s Scoreboard . . . . 166 11 .1 . Distribution of firms in Denmark, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 11 .2 . Share of firms that applied for financing in Denmark, 2007 and 2010 . . . . . . . . . 168 11 .3 . Result of loan applications by size of firm in Denmark, 2010 . . . . . . . . . . . . . . . . 168 11 .4 . Venture capital and growth capital in Denmark, 2007-13 . . . . . . . . . . . . . . . . . . . 169 11 .5 . Investments of Dansk Vaekstkapital, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 11 .6 . Scoreboard for Denmark, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 11 .7 . Definitions and sources of indicators for Denmark’s Scoreboard . . . . . . . . . . . . . 174 12 .1 . Distribution of firms in Estonia, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 12 .2 . Venture and growth capital investment in Estonia, 2007-13 . . . . . . . . . . . . . . . . . 177 12 .3 . Leasing and factoring in Estonia, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 12 .4 . Scoreboard for Estonia, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 12 .5 . Definitions and sources of indicators for Estonia’s Scoreboard . . . . . . . . . . . . . . 180 13 .1 . Distribution of firms in Finland, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 13 .2 . Venture and growth capital investment, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . 182 13 .3 . Incidence of solvency problems in Finland, June 2009 – April 2014 . . . . . . . . . . . 183 13 .4 . SME loans and guarantees granted by Finnvera, 2007-13 . . . . . . . . . . . . . . . . . . . . 184 13 .5 . SME export credit guarantees in Finland, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . 185 13 .6 . Scoreboard for Finland, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 13 .7 . Definitions and sources of indicators for Finland’s Scoreboard . . . . . . . . . . . . . . 189 14 .1 . Distribution of firms in France, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 14 .2 . Private equity investment in France, 2005-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 14 .3 . Scoreboard for France, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 14 .4 . Definitions and sources of indicators for France’s Scoreboard . . . . . . . . . . . . . . . 199 15 .1 . Distribution of operating firms in Greece, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 15 .2 . Entrepreneurship Fund in Greece, 2011-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 15 .3 . Loan guarantee programmes in Greece, 2008-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 15 .4 . Scoreboard for Greece, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 15 .5 . Definitions and sources of indicators for Greece’s scoreboard . . . . . . . . . . . . . . . 208 16 .1 . Distribution of firms in Hungary, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 16 .2 . Venture capital in Hungary, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 16 .3 . Scoreboard for Hungary, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 16 .4 . Definitions and sources of indicators for Hungary’s Scoreboard . . . . . . . . . . . . . 215 17 .1 . Distribution of operating firms in Ireland, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015 11TAblE OF COnTEnTS 17 .2 . Venture capital raised by Irish SMEs, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 17 .3 . Bankruptcies in Ireland, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 17 .4 . Scoreboard for Ireland, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 17 .5 . Definitions and sources of indicators for Ireland’s Scoreboard . . . . . . . . . . . . . . . 223 18 .1 . Distribution of firms in Israel, 2011-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 18 .2 . Average interest rates in Israel according to the size of the lender, 2010-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .,. . . . 225 18 .3 . Loan fees in Israel, 2009-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 18 .4 . Credit allocation fees in Israel, 2008-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 18 .5 . Israeli VC’s investments, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 18 .6 . Total VC’s Investments in Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 18 .7 . Percentage of businesses that continued to operate in Israel, according to year of establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 18 .8 . Government guarantee funds for SMEs in Israel, 2007-13 . . . . . . . . . . . . . . . . . . . 229 18 .9 . Details of credit volumes approved and executed 2007-13 in Israel . . . . . . . . . . . 230 18 .10 . Scoreboard for Israel 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 18 .11 . Definitions and sources of indicators for Israel’s Scoreboard . . . . . . . . . . . . . . . . 230 18 .12 . Definition of the business types in the various bank groups in Israel . . . . . . . . . 231 19 .1 . Distribution of firms in Italy, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 19 .2 . Early stage and expansion capital in Italy, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . 236 19 .3 . Payment delays in Italy, 2008-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 19 .4 . Scoreboard for Italy, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 19 .5 . Definitions and sources of indicators for Italy’s Scoreboard . . . . . . . . . . . . . . . . . 240 20 .1 . Number of business establishments and enterprises by industry and size in Japan (private, non-primary industry, 2012) . . . . . . . . . . . . . . . . . . . . . 242 20 .2 . The transition of the number of SMEs and micro enterprises in Japan . . . . . . . . 243 20 .3 . Scoreboard for Japan, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 20 .4 . Definitions and sources of indicators for Japan’s Scoreboard . . . . . . . . . . . . . . . . 249 21 .1 . Distribution of firms in Korea, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 21 .2 . Venture and growth capital in Korea, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 21 .3 . Scoreboard for Korea, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 21 .4 . Definitions and sources of indicators for Korea’s scoreboard . . . . . . . . . . . . . . . . 257 22 .1 . Distribution of firms in Mexico, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258 22 .2 . Equity financing in Mexico, 2004-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 22 .3 . Equity financing in Mexico, 2007-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 22 .4 . Seed capital programme in Mexico, 2007-10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 22 .5 . Financing programme for entrepreneurs in Mexico, 2010-13 . . . . . . . . . . . . . . . . 261 22 .6 . National credit guarantee system in Mexico, 2007-14 . . . . . . . . . . . . . . . . . . . . . . 262 22 .7 . Scoreboard for Mexico, 2007-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 22 .8 . Definitions and sources of indicators for Mexico’s scoreboard . . . . . . . . . . . . . . . 265 23 .1 . Distribution of firms in the Netherlands, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 23 .2 . Scoreboard for the Netherlands, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 23 .3 . Definitions and sources of indicators for the Netherlands’ Scoreboard . . . . . . . 268 24 .1 . Distribution of firms in New Zealand, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 24 .2 . SME requesting and obtaining finance in New Zealand, 2007-13 . . . . . . . . . . . . . 271 24 .3 . Scoreboard for New Zealand, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 201512TAblE OF COnTEnTS 24 .4 . Definitions and sources of indicators for New Zealand’s Scoreboard . . . . . . . . . 274 25 .1 . Distribution of firms in Norway, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 25 .2 . SME equity financing in Norway 2007–13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 25 .3 . Scoreboard for Norway, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 25 .4 . Definitions and sources of indicators for Norway’s Scoreboard . . . . . . . . . . . . . . 280 26 .1 . Distribution of firms in Portugal, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281 26 .2 . Equity capital invested by stage in Portugal, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . 282 26 .3 . Scoreboard for Portugal, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284 26 .4 . Definitions and sources of indicators for Portugal’s Scoreboard . . . . . . . . . . . . . . 286 27 .1 . Distribution of firms in the Russian Federation, 2013 . . . . . . . . . . . . . . . . . . . . . . . 287 27 .2 . Venture capital investment in the Russian Federation by stage, 2008-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290 27 .3 . Scoreboard for the Russian Federation, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 27 .4 . Definitions and sources of indicators for the Russian Federation’s scoreboard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 28 .1 . Distribution of firms in Serbia, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 28 .2 . Scoreboard for Serbia, 2007-13 .,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299 28 .3 . Definitions and sources of indicators for Serbia’s Scoreboard . . . . . . . . . . . . . . . 301 29 .1 . Distribution of firms in the Slovak Republic, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 302 29 .2 . Venture capital investments in SMEs in the Slovak Republic, by investment stage, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 29 .3 . Scoreboard for the Slovak Republic, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 29 .4 . Definitions and sources of indicators for the Slovak Republic’s Scoreboard . . . . 309 30 .1 . Distribution of firms in Spain, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310 30 .2 . Scoreboard for Spain, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 30 .3 . Definitions and sources of indicators for Spain’s Scoreboard . . . . . . . . . . . . . . . . 319 31 .1 . Distribution of firms in Slovenia, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 31 .2 . Scoreboard for Slovenia, 2007-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 31 .3 . Definitions and sources of indicators for Slovenia’s Scoreboard . . . . . . . . . . . . . . 324 32 .1 . Distribution of firms in Sweden, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 32 .2 . Capital invested by stage of development in Sweden, 2007–13 . . . . . . . . . . . . . . . 328 32 .3 . Scoreboard for Sweden, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 32 .4 . Definitions and sources of indicators for Sweden’s Scoreboard . . . . . . . . . . . . . . 333 33 .1 . Distribution of firms in Switzerland, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 33 .2 . Private equity and Venture Capital investments in Switzerland, 2007-13 . . . . . . 336 33 .3 . Scoreboard for Switzerland, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 33 .4 . Definitions and sources of indicators for Switzerland’s Scoreboard . . . . . . . . . . 339 34 .1 . Distribution of firms in Thailand, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 34 .2 . Scoreboard for Thailand, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 34 .3 . Definitions and sources of indicators for Thailand’s Scoreboard . . . . . . . . . . . . . 345 35 .1 . Distribution of firms in Turkey, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 35 .2 . Interest support programme of KOSGEB, 2003-13 . . . . . . . . . . . . . . . . . . . . . . . . . . 349 35 .3 . KGF guarantees and credit volume in Turkey, 2007-13 . . . . . . . . . . . . . . . . . . . . . . 350 35 .4 . International financial institutions direct loans with treasury guarantee in Turkey, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 35 .5 . Capitalisation of KOSGEB to iVCi, 2008-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 35 .6 . Scoreboard for Turkey, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015 13TAblE OF COnTEnTS 35 .7 . Definitions and sources of indicators for Turkey’s Scoreboard . . . . . . . . . . . . . . . 356 36 .1 . Distribution of firms in the United Kingdom, start of 2013 . . . . . . . . . . . . . . . . . . 357 36 .2 . Leasing and hire purchases to SMEs in the United Kingdom, 2007-13 . . . . . . . . . 360 36 .3 . Stock of asset-based financing in the United Kingdom, year-end 2007-13, by turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 36 .4 . Venture and growth capital investment in the United Kingdom, 2008-13 . . . . . . 361 36 .5 . Loans drawn and offered in the United Kingdom, 2009-13 . . . . . . . . . . . . . . . . . . 362 36 .6 . Scoreboard for the United Kingdom, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 36 .7 . Definitions and sources of indicators for the United Kingdom’s Scoreboard . . . 367 37 .1 . Distribution of firms in the United States, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 37 .2 . Percent change in the number of firms in the United States, 1989-2011 . . . . . . . 372 37 .3 . Gross loan guarantees, SBA 7(a) and 504 Programs in the United States, USD Thousands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 37 .4 . Scoreboard for the United States, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 37 .5 . Definitions and sources of indicators for the United States’ Scoreboard . . . . . . 380 A .1 . Core Indicators of the OECD Scoreboard on financing SMEs and entrepreneurs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 A .2 . Preferred definitions for core indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 A .3 . Difference between national statistical and financial definitions of SMEs . . . . . 392 C .1 . Information sheet on national programmes promoting SME access to finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404Figures 2 .1 . Financial conditions indices in the Euro area, Japan and the US, 2007-14 . . . . . . 33 2 .2 . Trends in outstanding SME loans 2011-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2 .3 . Trends in outstanding SME loans 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2 .4 . Trends in new SME business loans, 2011-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2 .5 . Growth patterns of outstanding SME loans, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . 37 2 .6 . Trends in the interest rate spread, 2007-13, and the 2013 SME interest rate . . . . 41 2 .7 . Trends in SME nominal interest rates and interest rate spreads: 2012-13 . . . . . . 42 2 .8 . Trends in SME,collateral requirements: 2011-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2 .9 . The proportion of Euro zone SMEs reporting access to finance as their most pressing concern, April-September 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2 .10 . Loan availability in the United States, 2000-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 2 .11 . Small business lending environment, 2000-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 2 .12 . Lending attitudes in Japan, 2000-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 2 .13 . Credit standards for small firms and the demand for loans by small firms in Japan, 2000-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 2 .14 . Credit conditions in the United Kingdom, 2010-14 . . . . . . . . . . . . . . . . . . . . . . . . . 49 2 .15 . Trends in the average SME loan growth and the new production of leasing, average year-on-year increase in 2011, 12 and 13 . . . . . . . . . . . . . . . . . 54 2 .16 . Crowd investments in the United States and Europe . . . . . . . . . . . . . . . . . . . . . . . 64 2 .17 . SME Securitisation in the United States and Europe . . . . . . . . . . . . . . . . . . . . . . . 65 3 .1 . SME non-performing loans, 2011-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 3 .2 . Trends in SME loan growth in 2013 and SME NPLs, 2010-13 . . . . . . . . . . . . . . . . . 76 3 .3 . Trends in the interest rate spread in 2013 and SME NPLs over 2010-13 . . . . . . . . 77FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 201514TAblE OF COnTEnTS 3 .4 . The impact of a one standard deviation increase in the average proportion of doubtful loans on the probability of loan applications granted, Spain 2002-10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 3 .5 . The impact of a one standard deviation increase in the average NPL rate on the probability of receiving a bank loan, United States, 1990-2010 . . . . . . . . . 79 3 .6 . Outstanding NPLs and losses on disposals on NPLs (in billions of yen) . . . . . . . 81 3 .7 . Corporate lending in Japan (in 100 million yen), 1995-2007 . . . . . . . . . . . . . . . . . . 82 3 .8 . Non-performing loan index for all commercial loans in Chile, 2009-14 . . . . . . . 83 3 .9 . Break-up of NPLs in Chile, 2009-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 3 .10 . Non-performing loans (% of credits) in Spain, all credit institutions . . . . . . . . . . 85 3 .11 . NPL ratio by sector in Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 4 .1 . Growth rates of business loans to non-financial corporations in Austria, 2004-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 4 .2 . Financial structure of SMEs and large firms in Austria, 2006-07 vs . 2012-13 . . . . 93 4 .3 . Interest rates for new business loans to non-financial corporations in Austria compared to the ECB interest rate for the main refinancing operations, 2003-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 4 .4 . Access to bank lending of Austrian Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 4 .5 . Trends in SME and entrepreneurship finance in Austria . . . . . . . . . . . . . . . . . . . . 101 5 .1 . Change in credit standards for SMEs in Belgium and the Euro zone, 2007-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 5 .2 . Rejection rates broken down by the size of enterprises in Belgium, 2008-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 5 .3 . Trends in SME and entrepreneurship finance in Belgium . . . . . . . . . . . . . . . . . . . 111 6 .1 . Debt financing by source of financing in Canada, 2013 . . . . . . . . . . . . . . . . . . . . . 114 6 .2 . Business debt outstanding in Canada, 2000-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 6 .3 . 90-day delinquency rate (%) and GDP in Canada, 2007-13 . . . . . . . . . . . . . . . . . . . 116 6 .4 . Trends in SME and entrepreneurship finance in Canada . . . . . . . . . . . . . . . . . . . . 121 7 .1 . Trends in SME and entrepreneurship finance in Chile . . . . . . . . . . . . . . . . . . . . . . 135 8 .1 . Entrepreneurship education and the image of entrepreneurs, percentages 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 8 .2 . Trends in SME and entrepreneurship finance in China . . . . . . . . . . . . . . . . . . . . . 148 9 .1 . Trends in SME and entrepreneurship finance in Colombia . . . . . . . . . . . . . . . . . . 156 10 .1 . Change in credit conditions and the expected demand of credit in the Czech Republic, 2012-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 10 .2 . Trends in SME and entrepreneurship finance in the Czech Republic . . . . . . . . . . 165 11 .1 . Trends in SME and entrepreneurship finance in Denmark . . . . . . . . . . . . . . . . . . 173 12 .1 . Impact of the financial situation on investments in Estonia, 2004-13 . . . . . . . . . 176 12 .2 . Trends in SME and entrepreneurship finance in Estonia . . . . . . . . . . . . . . . . . . . . 179 13 .1 . Trends in SME and entrepreneurship finance in Finland . . . . . . . . . . . . . . . . . . . . 188 14 .1 . Growth rates of bank loans to all firms in France, 2007-13 . . . . . . . . . . . . . . . . . . 192 14 .2 . Credit to firms according to size in France, 2007-14 . . . . . . . . . . . . . . . . . . . . . . . . 193 14 .3 . Credit conditions for SMEs in France and the Eurozone (supply side survey), 2007-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 14 .4 . Trends in SME and entrepreneurship finance in France . . . . . . . . . . . . . . . . . . . . 198 15 .1 . Trends in SME and entrepreneurship finance in Greece . . . . . . . . . . . . . . . . . . . . 207 16 .1 . Trends in SME and entrepreneurship finance in Hungary . . . . . . . . . . . . . . . . . . . 214FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015 15TAblE OF COnTEnTS 17 .1 . Average number of payment days from Customers to SMEs in Ireland . . . . . . . . 218 17,.2 . Trends in SME and entrepreneurship finance in Ireland . . . . . . . . . . . . . . . . . . . . 222 19 .1 . Lending in Italy, 2006-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 19 .2 . Credit conditions for SMEs and large firms in Italy, 2007-14 . . . . . . . . . . . . . . . . . 234 19 .3 . Ratio of new bad debts to outstanding loans in Italy, 2005-13 . . . . . . . . . . . . . . . . 235 19 .4 . Trends in SME and entrepreneurship finance in Italy, 2007-13 . . . . . . . . . . . . . . . 239 20 .1 . DI of lending attitudes of financial institutions in Japan, 1984-2014 . . . . . . . . . . 244 20 .2 . DI of credit standards in Japan, FY2005-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 20 .3 . Changes in outstanding loans to SMEs in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 20 .4 . Trends in SME and entrepreneurship finance in Japan . . . . . . . . . . . . . . . . . . . . . 248 21 .1 . Large enterprise and SME loans in Korea, 2001-13 . . . . . . . . . . . . . . . . . . . . . . . . . 252 21 .2 . Trends in SME and entrepreneurship finance in Korea . . . . . . . . . . . . . . . . . . . . . 256 22 .1 . Trends in SME and entrepreneurship finance in Mexico . . . . . . . . . . . . . . . . . . . . 264 24 .1 . Trends in SME and entrepreneurship finance in New Zealand . . . . . . . . . . . . . . . 273 25 .1 . Trends in SME and entrepreneurship finance in Norway . . . . . . . . . . . . . . . . . . . . 279 26 .1 . Trends in SME and entrepreneurship finance in Portugal, 2007-13 . . . . . . . . . . . 285 27 .1 . Bank lending conditions, SMEs, and demand for new loans in the Russian Federation, 2009-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 27 .2 . Trends in SME and entrepreneurship finance in the Russian Federation . . . . . . 294 28 .1 . Trends in SME and entrepreneurship finance in Serbia . . . . . . . . . . . . . . . . . . . . . 300 29 .1 . Change in credit standards for SMEs and large firms in the Slovak Republic, 2008-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 29 .2 . Change in the demand for bank lending by SMEs and large firms in the Slovak Republic, 2008-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 29 .3 . Trends in SME and entrepreneurship finance in the Slovak Republic, 2007-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 30 .1 . Credit to non-financial private sector adjusted for securitisation and sale in Spain, 1999-2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 30 .2 . Credit standards in Spain, 2002-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 30 .3 . Probability of default, mortgages in Spain, large firms and SMEs, 2012-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 30 .4 . Trends in SME and entrepreneurship finance in Spain . . . . . . . . . . . . . . . . . . . . . 318 31 .1 . Trends in SME and entrepreneurship finance in Slovenia . . . . . . . . . . . . . . . . . . . 323 32 .1 . Share of bank managers reporting increased loan volumes to businesses in Sweden, 2007-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 32 .2 . Share of loans to SMEs in Sweden, 2007-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 32 .3 . Trends in SME and entrepreneurship finance in Sweden . . . . . . . . . . . . . . . . . . . 332 33 .1 . Trends in SME and entrepreneurship finance in Switzerland . . . . . . . . . . . . . . . . 338 34 .1 . Trends in SME and entrepreneurship finance in Thailand . . . . . . . . . . . . . . . . . . . 344 35 .1 . Trends in SME and entrepreneurship finance in Turkey . . . . . . . . . . . . . . . . . . . . . 355 36 .1 . Gross lending SMEs in the United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 36 .2 . Stock of lending to SMEs and corporations in the United Kingdom, 2008-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 36 .3 . Trends in SME and entrepreneurship finance in the United Kingdom . . . . . . . . 366 37 .1 . Real gross domestic product, United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 37 .2 . Corporate Profits, Billions of Dollars, SAAR and as a percent of GDP and Industrial Sector, After Tax Profit Margins, Selected Firm Sizes . . . . 371FINANCING SMES AND ENTREPRENEURS 2015 © OECD 201516TABLE OF CONTENTSLook for the StatLinks2at the bottom of the tables or graphs in this book. To download the matching Excel® spreadsheet, just type the link into your Internet browser, starting with the http://dx.doi.org pre�x, or click on the link from Follow OECD Publications on:This book has... StatLinks2A service that delivers Excel �les from the printed page! ®http://twitter.com/OECD_Pubshttp://www.facebook.com/OECDPublicationshttp://www.youtube.com/oecdilibraryhttp://www.oecd.org/oecddirect/ OECDAlerts37.3. Total Nonfarm Payrolls in the United States: All Employees, Month Over Month Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37237.4. Quarterly Net Employment Change by Firm Size in the United States, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37337.5. Small Business Loan Balances at FDIC Insured Institutions in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37337.6. Paynet, Small Business lending Index in the United States. . . . . . . . . . . . . . . . . . 37437.7. Selected interest rates in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37537.8. Small Business Delinquency Rates in the United States, Paynet Data . . . . . . . . . 37637.9. Small Business Delinquency Rates, SBA Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37637. . Gross loan guarantees in the United States, SBA 7(a) and 504 Programs, USD Thousands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37737. . Defi nitions and sources of indicators for the United States’ Scoreboard . . . . . . 379Financing SMEs and Entrepreneurs 2015 An OECD Scoreboard © OECD 201517Executive summaryFinancing SMEs and Entrepreneurs 2015 monitors SMEs’ and entrepreneurs’ access to finance in 34 countries over the period 2007-13, based on data from central banks and national statistical agencies. The Scoreboard includes,indicators of debt, equity, asset-based finance and framework conditions for SME and entrepreneurship finance, complemented by demand-side information and recent developments in public and private initiatives to support SME finance. Taken together, these indicators form a comprehensive framework for policy makers and other stakeholders to evaluate the financing needs of SMEs and determine whether they are being met. The Scoreboard also constitutes a valuable tool to support the design and evaluation of policy measures, and to monitor the implications of financial reforms on access to finance and financing conditions for SMEs.In the current edition, detailed profiles are presented for Austria, belgium, Canada, Chile, the People’s republic of China, Colombia, the Czech republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Israel, Italy, Japan, korea, Mexico, the netherlands, new Zealand, norway, Portugal, the russian Federation, Serbia, the Slovak republic, Slovenia, Spain, Sweden, Switzerland, Thailand, Turkey, the united kingdom and the united States.The key findings of this Scoreboard are: ● Access to finance to SMEs continues to be constrained by lacklustre macro-economic performance and continued bank deleveraging. The economic recovery was uneven in 2013, and weak demand continued to weigh on the availability of internal funding for businesses. This was compounded by a decrease in both the outstanding stock of SME loans and new lending to SMEs in a majority of countries in 2013. As SMEs have fewer financing alternatives available than large firms, the former are impacted more by credit market conditions. ● Credit conditions eased in some countries but generally remain tight, especially for SMEs. There were some encouraging signs that credit standards were loosening in 2013, largely as a consequence of the unprecedented monetary easing in many parts of the world. These signs included the moderate easing of collateral requirements, the decrease of SME interest rates and the fall in the relative number of loan applications that were rejected. nevertheless, credit conditions remained tight on average compared to the pre-crisis period, particularly for SMEs and in countries that were most affected by the financial crisis. ● There are signs of a potential drop in demand for SME credit. More accommodating credit conditions occurred alongside a drop in SME lending, suggesting possible weaker demand for SME credit. On the other hand, an easing of credit conditions might require some time to translate into increased SME lending. It is also possible that credit access ExECuTIVE SuMMArY18 FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015and conditions have improved only for some SMEs, while others are finding it even more difficult to access credit than in the past. ● Payment delays were generally down, while bankruptcies showed a diverse picture in 2013. In contrast with previous years, payment delays and bankruptcies were no longer on the rise in 2013. While bankruptcies remained at their 2012 levels on average, payment delays decreased in a majority of Scoreboard countries, suggesting an ease in cash flows constraints. ● Non-performing loans (NPLs) pose a risk to the economic recovery in some European countries. High levels of nPls point to a deterioration of the overall quality of banks’ asset sheets and result in bank losses. This impairs the willingness of banks to lend, especially to SMEs, and could potentially lead to a new banking crisis. There was a rapid increase of SME nPls in some European countries up to and including 2013. However, the analysis of nPls is currently hampered by the heterogeneity of definitions and differences in national practices in the classification of SME nPls, and there is clear need for a harmonisation of data on nPls. ● Non-bank finance instruments are gaining some traction, but cannot compensate for a retrenchment of bank lending. The development of alternatives to bank lending is of crucial importance given the persistence of credit constraints. These instruments, which include venture and growth capital, business angel investment, asset-based finance instruments such as leasing and factoring, mezzanine finance, and crowdfunding, are garnering increasing attention by policy makers. The uptake of some of these non-bank instruments is still relatively small, however, and offer viable finance solutions for only a small subset of SMEs, for example medium-sized firms or high-tech start-ups. More research is needed regarding the cyclical nature of non-bank finance opportunities. Indeed, recent experience suggests that that the availability of financing instruments such as venture capital and leasing dried up significantly in the aftermath of the financial crisis. ● Securitisation of SME assets, although promising, has only a limited impact on SME financing. A healthy, safe and high-quality securitisation market for SME assets might be able to provide alternative capital market funding and revive corporate lending by unlocking resources of the banking sector. However, despite a recent resurgence, especially in the united States, the SME securitisation market remains relatively underdeveloped in comparison to other securitisation markets and is only of limited importance to the overall access to finance of SMEs and entrepreneurs. Structural barriers, most notably a lack of credit data, the existence asymmetric information and low awareness among SMEs, must be addressed in order to strengthen the development of the SME securitisation market. ● Loan guarantees remain the most widely used instrument at governments’ disposal to ease SME access to finance. Many loan guarantees programmes were created in the immediate aftermath of the financial crisis, and new initiatives, such as new counter-guarantee schemes, have been developed since 2012. Other public instruments to enhance SME finance included direct loans, micro loans, export guarantees, and tax exemptions and deferments. ● Many government initiatives to further develop non-bank finance instruments were introduced in 2013 and the first half of 2014, in particular to foster equity investments. These measures include setting up equity funds or taking participations in existing funds, 19FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015ExECuTIVE SuMMArYoffering tax incentives to equity investments or adapting the regulatory framework. Moreover, there is a tentative shift of policies toward SMEs that are innovative and/or have high growth potential. ● SME finance conditions will remain challenging in 2014-15. Global economic growth in 2014 and 2015 is expected to surpass 2013 levels, but political developments may cast a shadow over this recovery, and recent growth forecasts have been revised downwards. Growth and demand are not expected to recover fully, bank deleveraging will continue and credit availability will remain a constraint for SMEs in 2014-15. This holds especially true in Europe, where economic data has not met expectations, but concerns are growing in many emerging economies as well. ● This edition of the Scoreboard provides more extensive information on SME finance. better data on SME finance conditions and SME access to finance is needed for more informed policy discussions and, ultimately, better policies for SME finance. This edition of the Scoreboard has made significant progress, by integrating more information from quantitative demand-side surveys; reporting on both stocks and flows for loan variables; including information on asset-based financing; and offering more complete information on the definitions and sources of indicators.,● Further steps to improve data collection are needed. Further improvements should be pursued, however. In particular, the harmonisation of the data used in the Scoreboard and the standardisation of methods used should be pursued to improve the reliability of cross-country comparisons; this is the particularly the case for non-performing loans. Other recommended advancements include the distinction between employer and non-employer firms; increasing the granularity of the data by providing more information on the loan composition; a further breakdown of the data by firm size; a more complete and standardised overview of relevant government policies; the provision of more information on non-bank finance instruments and their uptake by SMEs; and the further exploration of the usefulness of survey data. FInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 201520ACrOnYMS AnD AbbrEVIATIOnSacronyms and abbreviationsaDB Asian Development bankaECM European Association of Mutual Guarantee SocietiesB2B business-to-businessB2C business-to-CustomerB2G business-to-GovernmentBIS bank for International SettlementsBLS bank lending SurveyCaD Canadian dollarCDS Credit Default SwapCGS Credit Guarantee SchemeCHF Swiss francCLo Collateralised debt obligationCLP Chilean pesoCoP Colombian pesoCZK Czech korunaDKK Danish kroneEBrD European bank for reconstruction and DevelopmentEC European CommissionECB European Central bankEIB European Investment bankEIF European Investment FundErP European rescue ProgrammeEu European unionEur EuroEurIBor Euro Interbank Offered rateEVCa European Venture Capital AssociationG20 Group of 20GBP british poundGDP Gross domestic productGPFI Global Partnership for Financial InclusionHuF Hungarian forintIFC International Finance CorporationIMF International Monetary FundIPo Initial public offeringIt Information TechnologyFCI Factors Chain InternationalJPy Japanese YenKrW korean wonMxn Mexican pesoFInAnCInG SMES AnD EnTrEPrEnEurS 2015 © OECD 2015 21ACrOnYMS AnD AbbrEVIATIOnSMSME Micro, small and medium-sized enterpriseMFI Micro Finance InstitutionnFIB national Federation of Independent businessnIS Israeli new shekelnoK norwegian kronenPL non-performing loannZD new Zealand dollaroECD Organisation for Economic Co-operation and DevelopmentPCS Prime collateralised securitiesPE Private Equityr&D research and developmentrMB Chinese renminbirSD Serbian dinarrSI risk Sharing InstrumentruB new russian rubleSaFE Survey on the Access to Finance of EnterprisesSBa Small business ActSEK Swedish kronaSME Small and medium-sized enterpriseSKK Slovak korunatHB Thai bahttry Turkish liranySE new York Stock ExchangeuF unidad de FomentouSaID united States Agency for International DevelopmentuSD united States dollarVC Venture capitalWPSMEE Working Party on SMEs and EntrepreneurshipISO Country AbbreviationsAUT Austria ISR IsraelBEL Belgium JPN JapanCAN Canada ITA ItalyCHE Switzerland KOR KoreaCHN People’s Republic of China MEX MexicoCHL Chile NLD NetherlandsCOL Colombia NZL New ZealandCZE Czech Republic NOR NorwayDNK Denmark PRT PortugalESP Spain RUS Russian FederationEST Estonia SRB SerbiaFIN Finland SVK Slovak RepublicFRA France SLO SloveniaGBR United Kingdom SWE SwedenGRC Greece THA ThailandHUN Hungary TUR TurkeyIRE Ireland USA United States of America23Financing SMEs and Entrepreneurs 2015 An OECD Scoreboard © OECD 2015Chapter 1Reader’s Guide: Indicators and methodologyThis chapter outlines the methodology of the Scoreboard on SME and entrepreneurship finance and provides guidance for the interpretation of data in country profiles. It presents the core indicators selected to monitor debt and equity financing, SME solvency and government policy measures to support SME access to finance. The chapter discusses limitations to cross-country comparability and recommendations for the improvement of data collection.FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 201524 1. rEADEr’S guiDE: inDiCAtOrS AnD MEthODOlOgythe OECD Scoreboard on SME and entrepreneurship finance provides a comprehensive framework for monitoring SMEs’ and entrepreneurs’ access to finance over time. the country profiles present data for a number of core indicators, which measure trends in SME debt and equity financing, solvency and policy measures by governments. taken together, the set of indicators provide policy makers and other stakeholders with a consistent framework to evaluate whether SME financing needs are being met, to support the design and evaluation of policy measures, and to monitor the implications of financial reforms on SMEs’ access to finance.this fourth edition of the Scoreboard on SME and entrepreneurship finance contains profiles for 34 countries: Austria, Belgium, Canada, Chile, China Colombia, the Czech republic, Denmark, Estonia, Finland, France, greece, hungary, ireland, israel, italy, Japan, Korea, Mexico, the netherlands, new Zealand, norway, portugal, the russian Federation, Serbia, the Slovak republic, Slovenia, Spain, Sweden, Switzerland, thailand, turkey, the united Kingdom and the united States.IndicatorsSME and entrepreneurship financing trends are monitored through 14 core indicators, listed in table 1.1, selected on the criteria of usefulness, availability, feasibility and timeliness (see Annex A for detailed description). the core indicators address specific questions related to SMEs’ access to finance. When considered as a set, they provide a consistent snapshot of a country’s market for business finance and its changes over time. in detail, the core indicators describe and monitor the following key dimensions: ● the allocation of credit by size of firm. ● the structure of SME debt, that is, the share of credit that funds operational expenses versus investment needs. ● the unmet SME demand for credit and the tightening of financial markets. ● the conditions for SMEs’ access to credit and how they compare to those for larger firms, including request for collateral and cost of debt. ● the extent and uptake of government guarantee programmes. ● the role that venture and growth capital plays in SME financing. ● the role that asset-based finance plays in financing SMEs. ● the incidence of other cash flow constraints, such as payment delays, and the ability of SMEs to survive economic downturns and credit crunches.25FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 1. rEADEr’S guiDE: inDiCAtOrS AnD MEthODOlOgyData collectionthe Scoreboard data are provided directly from experts designated by participating countries, from a range of sources specified in a table in the country profiles. they cover access to finance for employer firms, that is, for SMEs which have at least one employee, operating a non-financial business; non-employer firms and financial companies are in principle excluded from the analysis. this is consistent with the methodology adopted by the OECD-Eurostat Entrepreneurship indicators programme to collect data about business demography.Most of the indicators are derived from supply-side data provided by financial institutions and other government agencies. this is supplemented by national and regional demand-side surveys in order to provide a more comprehensive view of the evolution in financing trends and needs. the business loan data, which is key to the construction of several indicators in the Scoreboard, include overdrafts, lines of credit, short-term loans and long-term loans, regardless of whether they are performing or non-performing loans. Also, in principle, this data does not include,personal credit card debt and residential mortgages (see Annex A for details).the data in the present edition cover the period 2007 to 2013, where 2007 serves as the benchmark year from which trends over the entire period are measured. the pre-crisis benchmark is used to assess trends over the crisis (2008-09) and the recovery (2010-13). Specific attention is placed on changes which occurred in SME financing conditions in 2012-13.table 1.1. Core indicators in financing SMEs and entrepreneurs 2015Core Indicators What they show 1. Share of SME loans in business loans SMEs’ access to finance compared to larger firms 2. Share of SME short-term loans in total SME loansDebt structure of SMEs;% used for operations and% used for expansion 3. SME loan guarantees Extent of public support for SME finance 4. SME guaranteed loans Extent to which such public support is used 5. SME direct government loans Extent of public support for SME finance 6. SME rejection rate Tightness of credit conditions and willingness of banks to lend SME loans used/SME loans authorised Sometimes used in addition or instead of the rejection rate to gauge credit conditions. A decrease indicates that conditions are loosening 7. SME non-performing loans/SME loans When compared to the ratio of non-performing loans (NPLs) for all business loans it indicates if SMEs are less creditworthy than larger firms 8. SME interest rates Tightness of credit conditions and risk premium charged to SMEs 9. Interest rate spreads between large and small enterprisesTightness of credit conditions; indicates how closely interest rates are correlated with firm size10. Percent of SMEs required to provide collateral on their last bank loanTightness of credit conditions11. Venture capital and growth capital Ability to access external equity for start-up, early development and expansion stages12. Asset-based finance The take-up of non-bank finance instruments such as leasing, hire purchases, factoring and invoice discounting by SMEs13. Payment delays Cash flow problems; difficulty in paying and being paid14. Bankruptcies Rough indicator of the impact of a crisis, cash flow problems 1. rEADEr’S guiDE: inDiCAtOrS AnD MEthODOlOgy26 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Government policy measuresthe Scoreboard is not only a collection of data. it also provides key information on policy trends at the country and international level, and contains a thematic chapter, with analysis of the evolving international framework and policy priorities in the area of SME and entrepreneurship finance. this edition focuses on SME non-performing loans (npls) and their impact on SME lending and financial stability. it draws on findings from four editions of Financing SMEs and Entrepreneurs, the economic literature and country experiences. the chapter highlights the challenges in analysing npls, given the wide differences in definition and classification of these loans.Each country profile includes a section on government policy measures, which intends to monitor recent developments in policies to support the financing of SMEs and entrepreneurs. in most countries, anti-crisis measures were enacted by governments in 2008-09, and the 2015 edition of the Scoreboard looks at whether these policies and programmes were continued, phased out or altered in 2012-13 and early 2014. A number of new policy initiatives are also covered.Cross-country comparabilityAt the individual country level, the Scoreboard on SME and entrepreneurship finance provides a coherent picture of SME access to finance over time and monitors changing conditions for SME financing and the impact of policies. On the other hand, there are limits to the cross country comparisons that can be made, due to differences in definition and coverage between countries for many indicators. in a number of cases, it is not possible to adhere to the “preferred definition” of the core indicators. A proxy has been adopted in these instances. this is the case of a key indicator in this exercise, the SME loan, which requires bank data collected by firm size, or the availability of SME financial statements from tax authorities. When these conditions are not met, business loans below a given threshold (Eur 1 million or uSD 1 million) serve as a proxy for SME loans. For this reason, in each country profile, the Scoreboard data are complemented with a table of definitions, which provides the definition adopted for each indicator and the reference to the data source.the biggest challenge to comparability remains the lack of harmonisation in the statistical definition of an SME, which continues to prove difficult due to the different economic, social and political concerns of individual countries in their approach to SMEs (see Annex A).Despite these limitations, it is possible to compare general trends across countries, as the differences in the exact composition of the single indicator are muted when evaluating rates of change. however, again, caution is required in cross-country comparisons, especially as concerns the use of flow variables and stock measures. Flows, which are measured over an accounting period (i.e. one year), tend to reflect short-term events and are therefore more volatile than stocks, which measure the value of an asset at a given point in time, and thus reflect latest flows, as well as values that may have cumulated over time, net of depreciation.Recommendations for data improvementsto enable more timely collection of data and better cross-country comparison in the future, it is necessary for countries to advance in the harmonisation of data content and in the standardisation of methods of data collection. the adoption of a standardised table 27FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 1. rEADEr’S guiDE: inDiCAtOrS AnD MEthODOlOgyfor SME finance data collection (Annex B) has contributed to improve the process of data collection for the Scoreboard and should be further pursued, as country coverage increases. the adoption of a standardised format for reporting government policy programmes’ parameters and changes (Annex C) is also recommended to improve time consistency in reporting and update/follow-up of policy measures implemented by countries. the use of both standardised formats will allow for better inter-temporal analysis, as well as for a greater level of detail in reported information.A number of recommendations to improve data collection and reporting of core indicators are outlined in Box 1.1 (see Annex A for a more detailed discussion). these are deemed necessary for countries to progress in the harmonisation of definitions and facilitate inter-temporal and cross-country analysis of trends in SME and entrepreneurship finance.Box 1.1. Recommendations for improving the reporting of core indicators ● improve reporting of SME loan variables: ❖ separate reporting of financial information for non-employer and employer-firms; ❖ provision of both stock and flow data for SME loans; ❖ detailing of the loans composition, with indication of the different underlying products (e.g. overdrafts / lines of credit / leases / business mortgages or credit cards / securitised loans) and disclosure of such elements in the loan definition. ● provide comprehensive information about government guarantees at a central government level and corresponding guaranteed loans amount, as well as about the portion of the debt that is guaranteed. ● Offer more comprehensive information on government programmes that ease SMEs’ access to finance. ● provide data on non-performing loans for SMEs and for large firms, the latter to be,used as a benchmark. ● Collect information on SME loan fees, in addition to interest applied on the loans. ● Compile more complete information on the uptake and use of non-bank financing instruments, asset-based finance in particular. ● Detail the definition of collateral and improve reporting, using demand-side surveys to compensate for lack of supply-side data.the long-term objectives of timeliness, comparability, transparency and harmonisation of data should continue to be pursued actively by national authorities. to that end, national authorities should work with financial institutions to improve the collection of data on SME and entrepreneurship finance, by: ● requiring financial institutions to use the national definition for an SME based on firm size. ● requiring financial institutions to report on a timely basis to their regulatory authorities SME loans, interest rates, collateral requirements, by firm size and broken down into the appropriate size subcategories, as well as those SME loans which have government support. 1. rEADEr’S guiDE: inDiCAtOrS AnD MEthODOlOgy28 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 ● Work towards international harmonisation of data on non-performing loans. ● Encouraging international, regional and national authorities as well as business associations to work together to harmonise quantitative demand-side surveys in terms of survey population, questions asked and timeframes; encourage the competent organisations to undertake yearly surveys. ● promoting the harmonisation of the definition of venture capital in terms of stages of development.29Financing SMEs and Entrepreneurs 2015 An OECD Scoreboard © OECD 2015Chapter 2Recent trends in SME and entrepreneurship financeThis chapter analyses trends in SME and entrepreneurship finance over 2007-13, based on data collected for the country Scoreboards and information from demand-side surveys. A short overview of the global business environment sets the framework for the analysis of SME financing trends and conditions, focusing in particular on the changes which occurred in participating countries between 2012 and 2013. These recent developments are compared with trends during the 2008-09 crisis and early recovery stages. The pre-crisis year 2007 serves as a benchmark. The chapter concludes with an overview of government policy responses put in place to improve SMEs’ access to finance in light of recent developments.The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West bank under the terms of international law.FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 201530 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEWithin the context of global macro-economic and financial conditions, this chapter examines the emerging trends in SMEs’ and entrepreneurs’ access to finance and financing conditions for 34 countries over 2007-13. Following the major financial and economic crisis in 2008, which severely impacted access to finance for SMEs, recovery has been very uneven, and has even reversed for some Scoreboard countries. 2007 serves as the benchmark year from which trends over the entire period are measured. particular attention is devoted to developments in 2012, 2013 and early 2014.Business environment and the macroeconomic contextThe most severe financial and economic crisis in decades led to a contraction in GDp of 3.5% in 2009 for the OECD area. Since then, recovery paths have been uneven and increasingly divergent across countries. After a relatively robust growth of 3% for the OECD area in 2010, the recovery lost momentum and growth rates steadily decreased in most countries, up to and including 2013. While real GDp growth has been relatively robust in the united States, the united Kingdom and Japan, growth in the total Euro area remained negative in 2013, with several countries experiencing a double-dip recession. Compared with the pre-crisis period, the pace of growth in emerging economies such as China, Colombia or Turkey decelerated significantly in 2013, partly as a result of the recession in Europe.Growth expectations for 2014 and 2015 are more optimistic (see Table 2.1). GDp growth in 2014 is expected to surpass growth in 2013 in all but five Scoreboard countries (Chile, Israel, Japan, Switzerland and Turkey). Every country except Finland and Italy is expected to experience positive growth in 2014. With the exception of the Czech republic, Hungary, Ireland new Zealand, Slovenia and the united Kingdom, growth in 2015 is expected to further accelerate in all OECD Scoreboard countries. GDp growth for the OECD area for 2015 is forecast at 2.3%, not much below growth in the baseline year of 2007. These growth prospects, combined with increased consumer confidence in the Euro area, Japan and the united States, suggest that the major advanced economies are finally gaining momentum. Global growth and trade are expected to strengthen only at a moderate pace in 2014 and 2015, however. Growth is being boosted by accommodative monetary policies in many parts of the world, improving financial conditions and the receding drag of fiscal consolidation.Due to weak demand; falling energy and food prices; subdued wage growth; and price adjustments in stressed countries, inflationary pressures decreased even further in 2013, both in the Euro area and in the united States, with inflation rates of 1.3% and 1.46% respectively. Japan’s inflation rate remained low at 0.4%, while Greece, Sweden and Switzerland experienced negative inflation rates in 2013 (see Table 2.2) With the exception of emerging economies, inflation is expected to remain subdued in the next two years, with countries in the Euro area running the risk of persistent deflationary pressures.31FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCETable 2.1. Real GDP Growth in Scoreboard countries (%), 2007-13 and 2014-15 forecast Country 2007 2008 2009 2010 2011 2012 2013 2014 2015Austria 3.5 1.3 -3.5 1.8 3.2 0.9 0.3 0.5 0.9Belgium 3.0 1.0 -2.6 2.5 1.6 0.1 0.3 1.0 1.4Canada 2.0 1.2 -2.7 3.4 3.0 1.9 2.0 2.4 2.6Chile 5.2 3.2 -1.0 5.7 5.8 5.5 4.2 1.9 3.2China* 14.2 9.6 9.2 10.4 9.3 7.7 7.7 … …Colombia* 6.9 3.5 1.7 4.0 6.6 4.0 4.3 .. ..Czech Republic 5.5 2.5 -4.7 2.1 2.0 -0.7 -0.7 2.4 2.3Denmark 0.8 -0.7 -5.1 1.6 1.3 -0.8 -0.1 0.8 1.4Estonia 7.9 -5.3 -14.7 2.5 8.3 4.7 1.6 2.0 2.4Finland 5.2 0.7 -8.3 3.0 2.6 -1.5 -1.2 -0.2 0.9France 2.3 0.1 -2.9 1.9 2.1 0.4 0.4 0.4 0.8Greece 3.4 -0.4 -4.4 -5.3 -8.9 -6.6 -4.0 0.8 2.3Hungary 0.5 0.9 -6.6 0.8 1.8 -1.5 1.5 3.3 2.1Ireland 4.9 -2.7 -6.4 -0.3 2.8 -0.3 0.2 4.3 3.3Israel 6.1 3.9 1.6 5.7 4.2 3.0 3.4 2.5 3.1Italy 1.5 -1.0 -5.5 1.7 0.6 -2.3 -1.9 -0.4 0.2Japan 2.2 -1.0 -5.5 4.7 -0.5 1.5 1.5 0.4 0.8Korea 5.5 2.8 0.7 6.5 3.7 2.3 3.0 3.5 3.8Mexico 3.1 1.2 -4.5 5.1 4.0 3.7 1.3 2.6 3.9Netherlands 4.2 2.0 -3.3 1.0 1.7 -1.6 -0.7 0.8 1.4New Zealand 3.4 -0.7 0.6 1.8 1.2 2.6 2.5 3.2 3.0Norway 2.7 0.1 -1.6 0.5 1.3 2.9 0.6 1.7 1.8Portugal 2.5 0.2 -3.0 1.9 -1.8 -3.3 -1.4 0.8 1.3Russian Federation* 8.5 5.2 -7.8 4.5 4.3 3.4 1.3 .. ..Serbia* 4.5 3.8 -3.5 1.0 1.6 -1.5 2.5 .. ..Slovak Republic 10.7 5.4 -5.3 4.8 2.7 1.6 1.4 2.6 2.8Slovenia 6.9 3.3 -7.8 1.2 0.6 -2.6 -1.0 2.1 1.4Spain 3.8 1.1 -3.6 0.0 -0.6 -2.1 -1.2 1.3 1.7Sweden 3.5 -0.7 -5.1 5.7 2.7 0.0 1.5 2.1 2.8Switzerland 4.1 2.3 -2.1 3.0 1.8 1.1 1.9 1.5 1.5Thailand* 5.0 2.5 -2.3 7.8 0.1 7.7 1.8 ·· ..Turkey 4.7 0.7 -4.8 9.2 8.8 2.1 4.1 3.0 3.2United,Kingdom 2.6 -0.3 -4.3 1.9 1.6 0.7 1.7 3.0 2.7United States 1.8 -0.3 -2.8 2.5 1.6 2.3 2.2 2.2 3.1Euro area 3.0 0.4 -4.4 2.0 1.6 -0.7 -0.4 0.8 1.1Total OECD 2.7 0.2 -3.4 3.0 1.9 1.3 1.4 1.8 2.3Source: OECD Economic Outlook 2014d; * World Bank, World Development Indicators 2014.12 http://dx.doi.org/10.1787/888933194420In general, demand continued to be weak in most countries, as households and businesses sought to improve balance sheets. The labour market is still depressed in many areas of the world, with unemployment remaining in the double digits in many countries, most notably in the Euro area, where the average unemployment rate stood at 11.7% in 2013 and is expected to remain high in the next two years. Consumer confidence increased in the second half of 2013 and the first half of 2014 (Composite Leading Indicators (MEI): Confidence Indicators - OECD Standardised). Meanwhile, monetary policy is still very expansionary in most OECD countries. The pace of fiscal consolidation is expected to decrease both in the united States and in the Euro area as a whole, while China’s economy is expected to be buoyed by moderate fiscal stimulation. In contrast, the fiscal stance in Japan has shifted from fiscal easing to fiscal consolidation and is expected to remain contractionary in 2014 (OECD, 2014a). 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE32 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Table 2.2. Inflation in Scoreboard countries (%), 2007-13Country 2007 2008 2009 2010 2011 2012 2013Austria 2.17 3.22 0.51 1.81 3.27 2.49 2.00Belgium 1.82 4.49 -0.05 2.19 3.53 2.84 1.11Canada 2.14 2.37 0.30 1.78 2.91 1.52 0.94Chile .. .. .. 1.41 3.34 3.01 1.79China 4.75 5.86 -0.70 3.31 5.41 2.65 2.63Colombia 5.54 7.00 4.20 2.28 3.41 3.18 2.02Czech Republic 2.93 6.35 1.04 1.41 1.94 3.30 1.43Denmark 1.71 3.40 1.33 2.30 2.76 2.41 0.78Estonia 6.60 10.37 -0.08 2.98 4.98 3.93 2.79Finland 2.51 4.07 0.00 1.21 3.42 2.81 1.48France 1.49 2.81 0.09 1.53 2.12 1.96 0.86Greece 2.9 4.15 1.21 4.71 3.33 1.20 -0.92Hungary 7.94 6.07 4.21 4.88 3.96 5.71 1.73Ireland 4.88 4.05 -4.48 -0.95 2.58 1.69 0.50Israel 0.51 4.60 3.32 2.63 3.46 1.71 1.53Italy 1.82 3.38 0.75 1.54 2.74 3.04 1.22Japan 0.06 1.37 -1.35 -0.72 -0.28 -0.03 0.36Korea 2.53 4.67 2.76 2.96 4.00 2.19 1.31Mexico 3.97 5.13 5.30 4.16 3.41 4.11 3.81Netherlands 1.61 2.43 1.19 1.28 2.34 2.45 2.51New Zealand 2.38 3.96 2.12 2.30 4.43 0.88 0.92Norway 0.73 3.77 2.17 2.40 1.30 0.71 2.13Portugal 2.81 2.59 -0.84 1.40 3.65 2.77 0.27Russian Federation 9.01 14.11 11.65 6.86 8.44 5.07 6.76Serbia 6.39 12.41 8.12 6.14 11.14 7.33 7.69Slovak Republic 2.76 4.60 1.62 0.96 3.92 3.61 1.40Slovenia 3.61 5.65 0.86 1.84 1.81 2.60 1.76Spain 2.79 4.08 -0.29 1.80 3.20 2.45 1.41Sweden 2.21 3.44 -0.49 1.16 2.96 0.89 -0.04Switzerland 0.73 2.43 -0.48 0.70 0.23 -0.67 -0.24Thailand 2.24 5.47 -0.85 3.27 3.81 3.01 2.18Turkey 8.76 10.44 6.25 8.57 6.47 8.89 7.49United Kingdom 2.32 3.61 2.17 3.29 4.48 2.82 2.55United States 2.85 3.84 -0.36 1.64 3.16 2.07 1.46Source: World Bank, World Development Indicators 2014.12 http://dx.doi.org/10.1787/888933194438Financial conditionsFinancial conditions continued to support growth in the major advanced economies. The OECD financial conditions indices show that conditions improved significantly in the united States, where equity prices have risen to record levels, and the spread between corporate bonds and government bonds has stabilised close to pre-crisis levels (Figure2.1).1 Furthermore, credit standards have, on balance, been eased in the united States, and demand for credit is on the increase.In Japan, financial conditions recovered from their low in the second quarter of 2009 and saw an improvement in 2013 and 2014, mainly as a consequence of continued quantitative easing, a rise in stock prices and a moderate expansion of credit.In the Euro area, financial conditions were also generally favourable, remaining roughly unchanged in 2013, and improving in 2014. Moreover, in the most stressed countries, Ireland, Italy, Greece, portugal and Spain, indices showed a marked improvement. For these countries, bond yields and CDS spreads2 dropped significantly, as economic uncertainty 33FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEreceded, economic growth prospects improved, and reforms and rebalancing of weak economies started to take effect. Financial markets in the countries on the euro periphery also stabilised to a great extent thanks to the Outright Monetary Transaction (OMT) facility of the ECB (under which the central bank purchases government bonds issued by member states on the secondary market). As a result, financial fragmentation in the Euro area, although still significant at present, appears to be receding, and credit conditions for non-financial corporations are expected to converge across the Euro area gradually in the next few years (OECD, 2014a, d).3Figure 2.1. Financial conditions indices in the Euro area, Japan and the US, 2007-14Year-on-year growth rates, percentages-6-4-202468United States Japan Euro area2007 Q12007 Q22007 Q32007 Q42008 Q12008 Q22008 Q32008 Q42009 Q12009 Q22009 Q32009 Q42010 Q12010 Q22010 Q32010 Q42011 Q12011 Q22011 Q32011 Q42012 Q12012 Q22012 Q32012 Q42013 Q12013 Q22013 Q32013 Q42014 Q12014 Q22014 Q3Note: A unit increase (decline) in the index implies an easing (tightening) in financial conditions sufficient to produce an average increase (reduction) in the level of GDp of ½ to 1% after four to six quarters. Based on available information up to 25 April 2014.Source: OECD, 2014a.12 http://dx.doi.org/10.1787/888933193394Lending to SMEsSME loans and SME loan sharesSince 2011, the data on SME loans have illustrated very divergent trends among the Scoreboard countries and documented an uneven and often weak recovery. What is notable in 2013 is that some countries showed a reversal the growth of SME loans. In particular, Colombia, Hungary, Ireland, new Zealand and Serbia all experienced negative loan growth in 2013, in contrast with 2011 (in the case of Ireland and Serbia) and 2012 (in the case of Colombia, Hungary and new Zealand). Other countries, such as Italy, portugal and the united Kingdom showed a continuous decline of the outstanding stock of SME loans over 2011-13.On the other hand, several countries seem to have turned a corner in 2013. Estonia, Japan and the united States experienced a marked uptick in outstanding SME loans after years of decline. A continuous, albeit modest, increase in SME loans over 2011-13 was observed in France, Korea and Switzerland. In emerging markets such as Chile, the russian Federation and Turkey, loan growth was strong in 2011 and 2012 and 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE34 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015continued to outpace other countries in 2013, although the pace of credit expansion appeared to decelerate. This is consistent with the slow-down in their GDp growth rates (see Figure 2.2).Figure 2.2. Trends in outstanding SME loans 2011-13Year-on-year growth, percentages39-12-10-8-6-4-202468-6-14914192429,342011 2012 2013 2011 2012 2013TurkeyChina ChileRussian FederationColombiaIsraelFranceCanadaSwitzerlandKoreaSerbiaIrelandHungaryNew ZealandJapanItalyPortugalUnited KingdomUnited StatesGreeceEstoniaNotes: 1. Definitions differ across countries. refer to table of definitions in each respective country profile in Chapter 4. 2. Countries with flow data only are not included. 3. Belgium and 2013 data for Greece are excluded because of methodological changes in the data in 2012 and 2013 respectively.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193403The outstanding stock of SME loans in 2013 was still below pre-crisis levels of 2007 in 6 out of the 18 countries for which comparable data was available (Estonia, Hungary, Japan, portugal, the united Kingdom and the united States). Although economic growth in the OECD countries recovered in 2010, increasing year on year by 6.5 percentage points, SME lending in most countries did not follow, and often declined even further in the following years. In countries such as Hungary, Italy, Japan, Serbia, the united Kingdom and the united States, credit to SMEs decreased over the 2010-13 period. It is important to note that the data in Figure 2.3 does not take into account changes in general price levels. Therefore, in countries where credit was expanding, part of the increase is due to inflation, particularly in emerging economies like the russian Federation and Turkey. Conversely, the credit contraction in other countries is even more substantial than it appears. In emerging markets such as Chile, Colombia, the russian Federation and Turkey, loan growth was substantial in both the 2007-10 period, and the 2010-13 period.Thirteen countries submitted data on new business loans. Figure 2.4 illustrates the very diverse situation across OECD countries. new SME business loans contracted for three consecutive years in Finland, Ireland and Spain, in contrast with relatively buoyant growth in Denmark, the netherlands and the russian Federation. new loan growth, however, seemed to be pick up, or at least decreased at a slower pace, in all the countries in Figure2.4,with the exception of Austria, Finland and, most notably, the Czech republic. Table 2.3 recaps the data on SME loan stocks and loan flows.35FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEFigure 2.3. Trends in outstanding SME loans 2007-13relative to 2007, percentages (2007=0)100254.7-35-25-15-55152535450204060802010 2013 2010 2013TurkeyRussian Federation ChileColombiaSwitzerlandKoreaBelgiumSerbiaFranceIsraelCanada ItalyJapanUnited KingdomHungaryPortugalUnited StatesEstoniaNotes. 1. Definitions differ across countries. refer to table of definitions in each respective country profile in Chapter 4. 2. The Base year for russia is 2008. 3. Countries with flow data only are not included. 4. Belgium is excluded because of methodological changes in the data in 2012.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193418Figure 2.4. Trends in new SME business loans, 2011-13Year-on-year growth rates, percentages-20-15-10-50510152028.7-33.32011 2012 2013Russian Fed.ChileNetherlandsAustriaCzech RepublicDenmarkIrelandFinlandEstoniaSpainUnited KingdomCanadaSlovak RepublicNotes. 1. Definitions differ across countries. refer to table of definitions in each respective country profile in Chapter4.2. Countries with stock data only are not included. Data on the year-on-year growth rate for Canada in 2011 are not available. Data on the year-on-year growth rate for the Slovak republic in 2011 and 2012 are not available.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193420 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE36 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Table 2.3. Growth of SME business loans, 2007-13Year-on-year growth rate, as a percentageCountry 2008 2009 2010 2011 2012 2013Outstanding SME business loans (stocks) Belgium 7.5 -0.2 5.6 6.5 9.6 -0.5Canada -0.1 3.7 -0.9 4 -2.4 3.7Chile 11.3 6.9 8.8 20.4 14.7 4.5China n.a. n.a. 25.9 23.5 19.8 n.a.Colombia 12.7 -5.2 11.3 17.5 14.5 -5.4Estonia 2.1 -14.5 -10.8 -11.3 -4 2.5France 4.8 0.3 5.3 5.3 1.9 1.3Greece n.a. n.a. n.a. -7.1 -6.1 n.a.Hungary 10.3 -7.6 -11.1 0.3 4.5 -4.2Ireland n.a. n.a. n.a. 0.9 -6 -4.6Israel 0.2 -5.1 7.3 7 0.3 5Italy 2.1 1.2 6.6 -1.9 -1.6t -3.6Japan -0.7 -2.3 -1.9 -1.1 -0.8 1.5Korea 14.5 5 -0.6 3.1 1.5 5.9Mexico 16.9 -1 18.4 18.9 29.7 n.a.New Zealand n.a. n.a. 2.3 -0.8 5.4 -4.1Norway 25.7 -7.7 4.2 4.7 -0.3 n.a.Portugal 9.2 0.9 -1.6 -3.9 -10.1 -7.3Russian Federation n.a. 5 21.9 19.1 16.9 14.8Serbia 39.7 -0.7 5.9 2.8 -10 -8.1Slovak Republic 32.4 -0.5 0.1 -12 4.1 13.8Slovenia 15.5 -0.3 11.9 1.8 -4 n.a.Sweden 13.9 6.5 -4.7 2.8 -3.2 n.a.Switzerland 5.9 5.3 13.9 3.9 2.8 7.5Thailand 9.5 7.4 7.2 3.1 19.1 n.aTurkey 10.6 -1.6 50.7 29.8 22.7 35.9United Kingdom 11.3 -1.8 -1.8 -6.7 -4.5 -2.2United States 3.6 -2.3 -6.2 -6.8 -3.3 -0.4New SME business loans (flows) Austria n.a. n.a. -6.4 0.7 -1.4 -5Canada n.a. n.a. n.a. n.a. 8.9 7.8Czech Republic -0.5 -28.6 -16.6 0.6 4.6 -33.3Denmark -13.7 -19.2 23.2 -2.6 14.5 22.9Estonia -2.1 -39.6 -12.2 4.8 8.5 11.7Finland 2.6 -16.3 -16.5 -4.8 -1.7 -5.6Ireland n.a. n.a. n.a. -3.2 -10 -4.3Netherlands -5 -24.2 5.1 17.6 -3.6 0.5Russian Federation n.a. n.a. 56.1 28.7 14.6 16.2Slovak Republic n.a. n.a. n.a. n.a. n.a. 1.6Spain -9.5 -26.3 -20 -17.2 -16.2 -8.2United Kingdom n.a. -21.2 -6.1 -17.5 -10.1 -0.6Notes. 1. Definitions differ across countries. refer to table of definitions in each respective country profile in Chapter 4. 2. 28countries reported outstanding SME loans (stocks), 11 countries reported new SME loans (flows).Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933194448Figure 2.5 examines the consistency of growth patterns over time, by comparing the growth of outstanding SME loans between 2012 and 2013 with the growth trend recorded over the 2007-12 period. It illustrates that in Estonia, Hungary, Ireland, Japan, portugal, the united Kingdom and the united States, the outstanding stock of SME loans in 2013 had not yet recovered from the financial crisis, as the amount of outstanding SME loans remained below the 2007 level, even in nominal terms. Greece and portugal were still in recession in 2013; economic growth had recovered in the other countries, but lending to SMEs had not.37FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEThe graph also suggests a certain degree of consistency in trends, with a positive correlation between the historical performance of the SME loan portfolio and the growth,rate recorded in 2013. SME loan growth in 2013 was indeed stronger in countries which had not been affected as severely by the credit contraction of 2008-09, such as Israel, the russian Federation or Turkey. On the other hand, countries which still struggled to recover to pre-crisis levels of SME lending, such as Ireland, portugal and the united Kingdom, experienced negative growth rates in 2013.Most countries where SME lending contracted during the financial crisis and its aftermath had thus not caught up to other countries in 2013. To a lesser extent, SME lending also rebounded in Estonia, Japan and Korea. Conversely, countries where outstanding loans in 2012 surpassed their 2007 levels generally did not revert to negative SME loan growth in 2013. Italy, where SME loan growth turned negative only in 2011, new Zealand and Serbia are notable exceptions.Figure 2.5. Growth patterns of outstanding SME loans, 2007-13In percentages151050-5-10-15-20-40 -20 0 20 40 60 80PRTIREGBRUSASRBCANITAISRKORFRACHENZLRUSSVKEST JAPCHLCOLHUN2012/13 gr SME loans SME loans 2012 relative to 2007Notes. 1. Definitions differ across countries. refer to table of definitions in each respective country profile in Chapter 4. 2. Includes only countries reporting stock data. 3. Excludes Turkey (161.0, 35.9).Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193432SME loan sharesThe evidence on outstanding SME loan shares, defined as the shares of SME loans over total business loans, helps to set the above indicators on SME lending into the context of general business lending conditions in the Scoreboard countries. Table 2.4 summarises the evolution of loan shares over the 2007-13 period.SME loan shares should be interpreted in tandem with the evolution of total business loans and SME business loans. Changes in SME loan shares could signal several developments. rising shares might imply that SME loans were increasing more than business loans in general; that SME loans were stable or on the rise while business loans shrank; or that SME loans declined less than overall business loans. This indicator should be interpreted carefully and in proper context. Table 2.5 describes the recent changes in SME loan shares in terms of business credit scenarios and highlights the different dynamics in total business and SME lending that underlie similar trends. 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE38 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Table 2.4. Share of SME loans in total business loans, 2007-13As a percentage of total business loansCountry 2007 2008 2009 2010 2011 2012 2013SME business loans as stocks Belgium 61.7 59.6 62.7 62.3 65.1 65.4 67.2Canada 17.4 15.6 17.9 17.5 17.7 15.9 15.3Chile 17.4 15.2 17.5 18.2 18.2 18.5 17.5Colombia 32.7 30.2 27.7 25.6 24.8 25 21.1Estonia 35.8 34.5 31 29.4 28.3 26.2 26.5France 20.7 20.3 20.2 20.5 20.7 21.2 21.1Greece .. .. .. 38.5 36.8 38.8 ..Hungary 62.4 60.6 60 54.5 54.4 61.6 63.1Ireland .. .. .. 63.9 67.8 67.5 66.9Israel 40.4 36.6 37.4 38.9 39.8 40.7 44.3Italy 18.8 17.9 18.3 19 18.3 18.4 18.7Japan 69.6 67.3 66.7 67.8 66.9 65.8 65.3Korea 86.8 82.6 83.5 81.5 77.7 74.7 74.7Mexico 13 12.3 12 13 13.4 16.1 ..New Zealand .. .. 42.2 44 43 44.1 40.9Norway 42.9 43.7 40.4 41 40.4 40 ..Portugal 78.3 77.7 77.4 77.3 77.1 74.7 73.9Russian Federation .. 19.4 21.3 23.7 22.5 23 23.2Serbia 21 21.6 21.1 21.7 22 19.3 ..Slovak Republic 65.7 77.1 79.4 79.4 65.8 .. ..Slovenia 54.8 53.4 53.4 57 60.1 62.2 ..Sweden 13.8 12.9 13.9 14.8 14.3 12.7 ..Switzerland 81.2 81.1 80.1 89.5 88.7 88.2 88.4Thailand 28.1 26.6 26.9 38.4 36.8 37.6 ..Turkey 40.2 33.9 31.8 35.7 35.7 38.2 38.5United Kingdom 19.8 18.1 20 21.4 21.1 21.5 22.1United States 30.9 28.4 28.4 29 26.5 23.7 22.2SME business loans as flows Austria .. .. 11.8 12.6 13 11.6 12.1Canada .. .. .. .. .. 7.4 5.6Czech Republic 24.4 23.9 19 18.5 20.7 18.7 17.3Denmark 12.3 9.1 9 11.2 11.7 16.3 15Estonia 42.1 48.2 47.7 43.8 38.6 37.8 38.4Finland 27.1 21.9 19.6 15.3 21.1 22.3 18.5Netherlands 6.8 5.0 5.1 5.7 5.3 5.4Russian Federation .. .. 15.8 22.8 21.3 22.9 22.3Spain 4 3.1 6.7 7 5.1 5 6.3United Kingdom .. .. .. .. .. 14.1 12.5Notes. 1. Definitions differ across countries. refer to table of definitions in each respective country profile in Chapter 4. 2. The 2013 SMEloan share of Greece is not comparable to previous levels due to changes in the methodology.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933194458When interpreting the data on SME loan shares, it is important to keep in mind that large firms are generally less dependent on bank finance than SMEs and are able to finance themselves directly through the market, for example by launching public offerings for debt and equity. SMEs usually have far narrower financing sources available, making them more vulnerable to the changing conditions in credit markets, so an increasing SME loan share could be attributed to more favourable access to bank lending for SMEs vis-à-vis large firms, but also to the greater use of non-bank financing instruments of large enterprises. Hence, an increase in SME loan shares potentially reflects trends in financing opportunities and strategies by large firm rather than the increased access of SMEs, especially when 39FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEoccurring at a time of general lending contraction when large enterprises are expected to be resorting to other forms of finance. This can be observed in Austria, Belgium, Italy, Spain and the united Kingdom, where the increase in SME loan shares over the period did not necessarily indicate a better access to debt, since the overall loan volume decreased.Similarly, a decline in SME loan shares can occur in rather different financing environments. In the case of Canada, Chile, Denmark, France and Japan, this decline took place in the framework of expanding loan activity over 2012-13; SME loans grew, but not as much as total business loans, with large enterprises getting a larger share of the expanding business credit market.Box 2.1. The maturity of bank lending to SMEs: short-term versus long-term lending since the financial crisisIn the run-up to the financial crisis, bank lending volumes shot up in many areas of the world, fuelled by economic growth, cheap and abundant funding and the high profitability of the financial sector. The Great recession changed the underlying dynamics dramatically. Funding, especially of the short-term and of the interbank kind, quickly dried up, economic growth soured and often turned negative, while many financial institutions suffered huge losses and had to be rescued by the government. new banking rules such as Basel III and Dodd-Frank further underlined the need for deleveraging. As the Scoreboard amply illustrates, bank lending to SMEs has come under stress in many countries as a consequence.One would expect banks to restrict long-term lending more than short-term lending under such circ*mstances and a decrease of the average maturity of loans to SMEs. The Scoreboard data paints a more diverse picture, as can be judged from the data on the proportion of short-term loans to SMEs. Some countries, notably Colombia, Denmark, Estonia, Hungary and Finland, follow the expectations. In these countries, the proportion of short-term SME loans in the total,SME loans spiked in 2008 or 2009 and declined afterwards, as the immediate effects of the financial crisis ebbed. Most other countries follow a different pattern however; in Austria, Belgium, France, Ireland, Italy, Korea, portugal, Serbia and Spain the share of short-term loans showed a continuous decline since 2007, suggesting some structural evolution that trumps any potential effect of the financial crisis. In all these countries, SMEs systematically rely more on long term lending (see Table 2.6). This is an interesting venue for further research.Table 2.5. Trends in SME loan shares and credit market scenarios, 2012-13SME loan share change CountriesTrends in SME and total business loan stockCredit market scenariosSME loan shares increased Estonia, Korea, Russian Federation, Slovak Republic, Switzerland, TurkeySME loans increased more than total loans increasedIncreased share of a growing business loan stockSME loan shares increased Israel, the Netherlands SME loans increased but total loans decreasedLarger share of a shrinking business loan stockSME loan share increased Austria, Belgium, Italy, Spain, United KingdomSME loans decreased slower than total loans decreasedLarger share of a shrinking business loan stockSME loan shares decreased Czech Republic, Hungary, Ireland, New Zealand, PortugalSME loans decreased faster than total loans decreasedSmaller share of a shrinking business loan stockSME loan shares decreased Colombia Finland, United StatesSME loans decreased while total loans increasedSmaller share of a growing business loan stockSME loan shares decreased Canada, Chile, Denmark, France, JapanSME loans increased but not as fast as total loans increasedSmaller share of a growing business loan stockSource: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015. 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE40 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Credit conditions for SMEsThis section describes credit conditions for SMEs and entrepreneurs based on Scoreboard data on the cost of bank finance, collateral requirements and rejection rates. It complements this information with findings from supply-side and demand-side surveys.Cost of creditIn 2013, an easing of credit terms was observed in almost all Scoreboard countries, as monetary policy in most countries remained very loose and financial conditions often improved. This is in contrast to the 2007-10 period, when in most countries, SMEs faced more severe credit conditions than large enterprises, in the form of higher interest rates, shortened maturities and increased requests for collateral (OECD, 2012a).Between 2007 and 2013, the interest rate spread between large firms and SMEs widened considerably for most Scoreboard countries for which data are available, with the exception of Belgium, Canada, Colombia, Korea, Serbia, Sweden and the united States. In Denmark, Hungary, Ireland, Italy, Spain and new Zealand, the interest rate spread widened by more than 100 basis points over this period. This suggests that the established practice of financial institutions lending to SMEs at less favourable conditions has worsened since the crisis. The perception of the riskiness of SME lending has changed over time, resulting Table 2.6. The share of short term SME loans as a proportion of all SME loans, 2007-13Country 2007 2008 2009 2010 2011 2012 2013Austria … … 59.82 54.59 52.17 52.43 51.06Belgium 39 38 32 31 31 29 29Canada 41.6 … 43.4 36.3 35.1 39.0 46.0Colombia 19.44 26.3 23.11 22.02 16.19 21.73 22.16Denmark 64.7 74.57 78.79 64.73 70.53 51.49 49.25Estonia 59.98 74.94 84.62 83.92 78.07 73.94 71.19Finland 12.96 16.83 21.12 19.42 17.92 23.24 23.06France 23.85 22.55 19.78 19.07 19.17 19.18 19.75Hungary 64.2 67.7 77.4 78.6 77.1 78.8 65.9Ireland 30.82 25.22 20.82 14.26 9.46 8.03 8.25Italy 31.62 29.55 26.76 24.31 23.57 23.41 21.97Korea 75.06 73.39 70.24 68.76 66.21 63.92 61.93Norway 19.26 18.6 16.79 16.82 16.72 18.87 …Portugal 31.53 30.14 31.2 29.52 27.43 21.53 20.54Serbia 34.98 31.67 34.2 34.17 30.28 27.21 29.77Slovak Republic50.45 39.67 41.4 41.4 39.51 40.6 …Spain 96.16 96.98 93.69 93.43 95.14 95.24 94.03Sweden 15.12 14.68 13.62 14.39 14.75 14.31 …Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933194467In 2013, a (further) decline in the relative importance of short-term lending was observed for eight countries (Austria, Denmark, Estonia, Finland, Italy, Korea, portugal and Spain), while only four (Colombia, France, Ireland and Serbia) witnessed an increase.Box 2.1. The maturity of bank lending to SMEs: short-term versus long-term lending since the financial crisis (cont.)41FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEin relatively higher average interest rates charged to SMEs. The graph also suggests a correlation between the level of the interest rate and the interest rate spread; in other words, higher average interest rates charged on SMEs often go hand in hand with a significant interest rate spread (see Figure 2.6).Figure 2.6. Trends in the interest rate spread, 2007-13, and the 2013 SME interest rateSME interest rate spread 2007-13, %0.500-0.50-1.00-1.502.00 2.90 3.80 4.70 5.60 6.50 7.40AUTBELCAN**CZEDENESTFINFRAGRCIREITAKORPRTESPSWEGBR*USAHUNSME interest rate 2013, %Notes: Excludes Colombia (19.77,-4.14) and new Zealand 9.59,-1.05). * Base year is 2008. ** Base year is 2009.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193448In 2013, the average interest rate charged on SME loans declined in 25 out of 26 countries for which data are available, with the exception of Canada. The average interest rate for large firms also declined in the majority of Scoreboard countries. Concerning the interest rate spread, that is the difference in the interest rate charged to large firms and SMEs, there is no clear pattern in its evolution; between 2012 and 2013, this spread increased in 11countries, declined in 12 countries and remained constant in 3 countries.Figure 2.7 captures both the change in SME interest rates and the change in interest rate spreads between 2012 and 2013. Countries where the SME interest rate dropped substantially, i.e. Chile, Colombia, Denmark, Estonia, Korea, portugal and Serbia, also recorded a decrease in the interest rate spread. Conversely, in Canada, both SME interest rates and the interest rate spread were up in 2013. unsurprisingly, the interest rate spread remained positive for every country included over the whole period; large firms are consistently offered credit at lower average interest rates than SMEs.Other fees associated with SME lendingCurrently no data are available for Scoreboard countries on other costs associated with SME lending in addition to interest rates, such as loan application fees, other fees and commissions. It would be desirable to collect this information in the future, in order to provide a more complete picture of the total costs of borrowing for SMEs. Available data are very sparse, however, as information on non-interest charges are usually privately held by the banking sector and are not collected on a systematic basis by authorities. This is an area which could be developed further in the future.A corrigendum has been issued for this page. See: http://www.oecd.org/about/publishing/Corrigendum-Financing-SME-Scoreboard.pdf,2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE42 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Figure 2.7. Trends in SME nominal interest rates and interest rate spreads: 2012-13In percentage points0.600.400.200-0.20-0.400.60-0.80-1.00 -0.90 -0.80 -0.70 -0.60 -0.50 -0.40 -0.30 -0.20 -0.10 0 0.10 0.20 0.30AUTBELCANCHICZEDNKESTFINESP*IREGBRUSASRBITAISRKORCHENZLFRASWENLDChange interest rate spreadChange SME interest rateNotes: Chile (1.49,-1.05) and Colombia (-1.97,-0.63) are excluded. * Base year is 2008.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193458Collateral requirementsData on collateral is difficult to obtain and represent an area where reporting improvements are needed to better assess the evolution in SME financing conditions. 12Scoreboard countries reported on collateral requirements between 2011 and 2013. As the data comes from demand-side surveys and the methodology, sample and questionnaire changes from one country to the other, some caution is advised when comparing countries. In most countries, more than half of all SME loans were collateralised. The main exception is the united Kingdom, where only 30% of all loans were collateralised in 2013. In Switzerland, more than three out of four loans were collateralised, while in the Slovak republic, the percentage of collateralised loans amounted to 100%, as it has a mandatory collateral requirement.4In 2013, collateral requirements decreased in seven out of ten countries, most notably in Canada. In the Slovak republic, the requirements were stable, while Italy and Serbia reported that a higher percentage of SMEs had to provide collateral in order to access bank finance. Although the sample size is modest, these data suggest that collateral requirements were loosened in 2013, marking a deviation from the trend in previous years.Rejection ratesAs with data on collateral, rejection rates are usually gathered from demand-side surveys and are currently unavailable for almost half of Scoreboard countries. nonetheless, this indicator helps gauge the financing conditions SMEs face. Higher rates of rejection are indicative of constraints in the credit supply, which are a particular concern for SMEs as rejection rates are traditionally lower for large enterprises. A high number of rejections of loan applications illustrates that loan demand is not being met, either because the terms and conditions of the loan offers are deemed unacceptable, the average creditworthiness of the loan applications have deteriorated or banks are rationing credit. The indicator sheds light on the supply of credit to SMEs. 43Financing SMES and EntrEprEnEurS 2015 © OEcd 2015 2. rEcEnt trEndS in SME and EntrEprEnEurShip FinancEFigure 2.8. Trends in SME collateral requirements: 2011-13% of SME banks loans requiring collateral10090807060504030201002011 2012 2013Slovak RepublicPortugalSwitzerlandBelgiumCanadaChina ItalyColombiaSerbiaSpainFinlandUnited KingdomNotes: definitions differ across countries. refer to table of definitions in each respective country profile in chapter4. 2011 and 2012 data for china is unavailable.Source: data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193462the Scoreboard data show that the proportion of SMEs reporting a rejection of their credit application varies considerably across countries (see table 2.8). in some countries, SME loan applications were seldom (e.g. austria) or never (e.g. France) rejected in the sample of SMEs surveyed in 2013, suggesting relative easy access to bank finance in these countries. in greece, Korea or the Slovak republic, among others, rejections were much more common. however, the rejection rate decreased for nine out of 13 countries for which data was available in 2013 (and remained constant for Serbia), signalling an easing of table 2.7. Trends in SME loan rejection rates: 2007-132007 2008 2009 2010 2011 2012 2013change 2013/2012Austria n.a. n.a. 7 n.a. 3 1 n.a. n.a.Belgium n.a. n.a. n.a. n.a. 10 18 10 -8Canada 6 n.a. n.a. 9 8 7 9 2Finland n.a. n.a. n.a. n.a. 1 5 11 6France n.a. n.a. 14 12 10 11 0 -11Greece n.a. n.a. n.a. n.a. 29 38 36 -2Ireland n.a. n.a. n.a. n.a. 28 28 19 -9Italy 3.1 8.2 6.9 5.7 11.3 12.0 8.3 -4Korea 41.5 47.2 40.7 48.7 43.4 41.7 39.8 -2New Zealand 6 13 18 28 13 14 10 -4Portugal n.a. n.a. n.a. n.a. 23 27 11 -16Serbia 18.7 17.2 28.4 27.1 15.8 31.5 31.8 0Slovak Republic n.a. n.a. n.a. n.a. 57.2 n.a. 53.2 n.a.Spain n.a. n.a. 23 16 14 19 14 -5United Kingdom n.a. n.a. n.a. 38 32 31 36 5Source: data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015; EcB Surveys on SME access to finance.12 http://dx.doi.org/10.1787/88893319447802_852015011_029-068.indd 43 4/13/2015 1:28:43 PM 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE44 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015access to finance for SMEs. rejection rates dropped markedly in Belgium, France, Ireland and portugal. In contrast, Canada, Finland and the united Kingdom witnessed an increase in the proportion of loans that were rejected in 2013. It should be noted that rejection rates in these countries were still at relatively low levels (with the exception of the united Kingdom).It is noteworthy that declining loan rejection rates sometimes coincide with lower levels of SME lending, which suggests the drop in lending is mainly due to a lack of demand for credit from SMEs in these cases.Table 2.8. ECB Survey on SME access to financeAs a percentage of total SMEs surveyedCategory H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014Availability of loans Deteriorated (net) -14 -20 -22 -10 -11 -4 0Willingness to lend Deteriorated (net) -20 -23 -27 -21 -17 -11 -2Applied for a loan 32 28 30 31 31 32 30Granted in full 67 65 63 61 65 66 68Rejected 9 12 14 10 11 10 12Interest rate Increased (net) 54 42 27 17 19 9 -9Collateral requirements Increased (net) 33 36 39 35 31 26 29Note: The net percentage is the difference between the percentage of firms reporting that the given factor has improved and the percentage reporting that it has deteriorated or the difference between the percentage reporting that it had increased and the percentage reporting that it has decreased.Source: ECB (2014).12 http://dx.doi.org/10.1787/888933194483Additional evidence on credit conditions from survey dataSurvey data complements the evidence from the data reported in the Scoreboard and offers very useful insights into SME finance conditions that are hard to obtain otherwise. In particular, these data could shed some light on distinguishing between demand and supply factors behind changes in SME lending. If a tightening of credit conditions, as perceived by SMEs, coincides with a fall of SME lending, at least part of this fall can most likely be attributed to supply side factors. Conversely, a drop in SME lending is more likely due to a fall in the demand for credit from SMEs if perceived credit conditions remain unchanged. The evidence from demand-side surveys, where firms are surveyed to voice their opinion on perceived credit conditions, can be complemented with supply-side surveys, which are,usually conducted by national banks to gauge the credit conditions and the demand for credit by surveying senior loan officials.For Euro zone countries, the ECB Survey on SME access to finance, undertaken every six months, is of particular interest to gauge the perception of SMEs on how the credit conditions are evolving.5 It shows a decrease in the net balance of SMEs stating that the availability of loans had deteriorated, for the second half of 2013 and the first half of 2014, when the number of respondents reporting a decrease in the availability of loans was similar to those stating an increase. There were similar results with respect to the willingness to lend; the net balance of responders reporting a deterioration peaked in the first half of 2012 and declined afterwards, with the pace gathering momentum in the first half of 2014. The number of loan applications granted in full rose to 68% in the first half 45FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEof 2014, from a low of 61% in the second half of 2012. The net balance of respondents reporting an increase of the average interest rate also declined significantly over the last few years and even turned negative in the first half of 2014. The net balance stating an increase in collateral requirements also fell from its 2012 peak, although it increased again slightly according to the latest survey.In the Euro area, the access to finance and finance conditions appear to be consistently more favourable for large enterprises than for SMEs, with a smaller percentage of large firms reporting supply restrictions in the provision of bank loans, consistently higher rates of success and lower rejection rates and a considerably lower net percentage of large firms reporting an increase in interest rates and collateral requirements (Table 2.8).Access to finance was considered to be the most pressing concern for 13% of Euro zone SMEs in the April-September 2014 SAFE survey. This is down from 14% in the survey conducted 6 months earlier and from 16% in the April-September 2013 survey, suggesting an improvement of credit access for SMEs. The average number of 13% masks very wide cross-country differences, however, as Figure 2.9 shows that, while less than 10% of Austrian and Slovak SMEs rank access to finance as their most pressing concern, this proportion rises to 17% and more in countries such as Ireland and Greece, portugal and Spain, with Greece the outlier at 32%. It should be noted, however, that the proportion of SMEs considering access to finance as their main concern fell most in these countries. More SMEs than large firms describe access to finance as their most pressing concern (13% and 11% respectively).Figure 2.9. The proportion of Euro zone SMEs reporting access to finance as their most pressing concern, April-September 2014353025201510507 710 11 1114 1417 17 18321311AustriaSlovak RepublicFinlandBelgiumFranceNetherlandsItalyPortugalSpainIrelandGreeceAll SMEsLarge firmsSource: ECB (2014).12 http://dx.doi.org/10.1787/888933193472In the united States, the nFIB research Foundation collects Small Business Economic Trends data on a monthly basis since 1986. Only 2% of small business owners considered finance to be their single most important problem according to the november 2014 survey. In addition, only 4% of respondents stated that their credit needs were not being met, which is a historic low. The reported loan availability dropped dramatically in 2007 and reached a low in 2009, after which it recovered in the following years. During 2013 and the first half of 2014, reported loan availability was broadly in line with the pre-crisis period (see Figure 2.10). 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE46 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Figure 2.10. Loan availability in the United States, 2000-141816141210642082000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20113 2014Note: net percent «Harder» minus «Easier» Compared to Three Months Ago.Source: Dunkelberg and Wade (2014).12 http://dx.doi.org/10.1787/888933193487The united States Federal reserve Board surveys senior loan officers on their banks’ lending practices on a quarterly basis, including a question on the evolution of credit standards for approving small business loans or credit lines (where small businesses are businesses with annual sales of less than uSD 50 million). According from this survey, credit standards for small businesses in the united States tightened dramatically between 2008 and 2010. This is very much in line with the experience in other OECD countries. Starting from 2011, senior loan officers report that conditions loosened somewhat, a trend that has picked up pace since 2013.The same survey also includes a question regarding the demand for bank credit from small businesses. Senior loan officers are asked how the demand of small business loans changed over the last three months. possible answers range from a “substantially stronger” demand to a “substantially weaker” demand. Subtracting the percentage of respondents who answered that demand was (substantially or moderately) weaker from the percentage who thought demand was (substantially or moderately) stronger, provides an indicator of overall demand for loans of small businesses (Figure 2.11). The reported demand for loans from small business broadly mirrors the tightness of lending standards; demand plummeted when the financial crisis hit the American economy and began a hesitant recovery in 2011.In Japan, the TAnKAn survey of Japanese businesses (literally translated as the Short-period Economy Observation), is a quarterly poll of business confidence published by the Bank of Japan. In order to provide an accurate picture of business trends, a representative and large-scale sample of the Japanese business population is asked to choose between different alternatives to best describe prevailing business conditions. One question pertains to the “lending attitude of financial institutions”, where the respondents can choose between “accommodative,” “not so severe” and “severe” as best describing their view of lending attitudes. A single indicator is derived on the basis of these answers.The TAnKAn survey indicates a sharp tightening of the perceived lending attitudes between the first quarter of 2008 and the third quarter of 2009, as the financial crisis constricted the access of finance to Japanese businesses. After Q3 2009, perceived financial conditions improved steadily. In the second quarter of 2014, financing conditions as 47FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEviewed by Japanese businesses were broadly in line with the pre-crisis period of 2005-2007. It is noteworthy that larger firms consistently describe financing conditions as more accommodative compared to medium-sized firms and especially small businesses, which regard the lending attitudes as the most restrictive (see Figure 2.12).Figure 2.11. Small business lending environment, 2000-1475553515-5-25-45-652000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Net Percentage of Domestic Respondents Tightening Standards for C&I Loans for Small BusinessesNet Percentage of Domestic Respondents Reporting Stronger Demand for C&I Loans for Small Businesses,Source: Federal reserve Board (2014).12 http://dx.doi.org/10.1787/888933193495Figure 2.12. Lending attitudes in Japan, 2000-143020100-10-202000-032000-092001-032001-092002-032002-092003-032003-092004-032004-092005-032005-092006-032006-092007-032007-092008-032008-092009-032009-092010-032010-092011-032011-092012-032012-092013-032013-092014-03Lending attitude for large enterprisesLending attitude for small enterprises Lending attitude for medium-sized enterprisesSource: Bank of Japan (2014b).12 http://dx.doi.org/10.1787/888933193500The Bank of Japan also initiated the quarterly “Senior Loan Officer Opinion Survey on Bank Lending practices at Large Japanese Banks” in April 2000, broadly modelled on the survey from the American Federal reserve Board. It aims to quantitatively measure the view of senior loan officials concerning the loan market, more particularly the demand for loans, standards and terms of loans, and other matters, on a scale from 1 to 5 or 1 to 3. The result of each question is then expressed as a percentage of the total response. 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE48 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Demand for credit in Japan again suffered under the financial crisis, with the exception of a sharp spike in the demand in the first quarter of 2009. In the 2008-13 period, demand for loans by Japanese small firms remained mostly negative. Only data from the third quarter of 2013 indicates an uptick in the demand for loans from small firms. Somewhat remarkably, Japanese loan officials report a loosening of credit standards for small firms over the 2007-14 period, the financial crisis notwithstanding, credit standards have been reported to become less restrictive, although the pace of the reported loosening declined considerably (Figure 2.13).Figure 2.13. Credit standards for small firms and the demand for loans by small firms in Japan, 2000-1450403020100-10-20-302000-032000-092001-032001-092002-032002-092003-032003-092004-032004-092005-032005-092006-032006-092007-032007-092008-032008-092009-032009-092010-032010-092011-032011-092012-032012-092013-032013-092014-032014-09Demand for loans by small firms Credit standards/small firmsSource: Bank of Japan (2014a).12 http://dx.doi.org/10.1787/888933193512In the united Kingdom, the quarterly Credit Conditions Survey from the Bank of England surveys lenders about changes in trends. The survey covers secured and unsecured lending to households and small businesses; and lending to non-financial corporations, and to non-bank financial firms. Data for SMEs is available from the fourth quarter of 2009 up to the second quarter of 2014. During most of this period, lending conditions generally deteriorated (Figure 2.14). A reversal of this trend can be observed from the second quarter of 2013 as maximum credit lines, spreads on loans and especially fees/commission on loans all became more favourable since then, while collateral requirements remained flat according the uK lenders.The evidence from this section illustrates a moderate easing of credit conditions and standards since 2010, which continued in 2013 and the first half of 2014. Similarly, the costs of bank credit have fallen in recent years as a result of loose monetary policy. Despite this trend, SME lending often decreased in 2013, often in the same countries where credit conditions improved. portugal provides the most striking example of a country where easier credit conditions coincided with a fall in SME lending over the same period. rejection rates in 2014, at 11%, were much lower than in 2013 (27%). Collateral requirements were also down in 2013 and 2014 in portugal, although more modestly. The average interest rate charged for an SME loan also dropped by 10% year-on-year from 2013 to 2014. Whereas 21% of all SMEs described access to finance as their most pressing 49FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEsurvey in the October 2012-March 2013 survey conducted by the ECB, that proportion fell to 18% one year later. Despite these four indications that credit conditions for portuguese SMEs were indeed improving between 2012 and 2013, business lending to SMEs did not pick up in 2013. On the contrary, SME lending in portugal shrank by 7.3% year-on year between 2013 and 2014. Greece, Spain, the united Kingdom and the united States all witnessed a similar (but not as clear-cut) coincidence of more accommodating credit conditions one the one hand and a fall in SME lending on the other over the 2012-13 period.Figure 2.14. Credit conditions in the United Kingdom, 2010-14151050-5-10-15-202010 2011 2012 2013 2014How have spreads on loans to small businesses changed? Past three monthsHow have fees/commissions on loans to small businesses changed? Past three monthsHow have collateral requirements for loans to small businesses changed? Past three monthsHow have maximum credit lines for small businesses changed? Past three monthsQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3Source: Bank of England (2014).12 http://dx.doi.org/10.1787/888933193523The dual phenomenon of lower SME lending at a time of easing of costs and conditions may have several explanations. First, a lack of demand for bank loans rather than the unavailability of supply might explain the drop in SME lending observed in many countries. Second, an easing of credit conditions might not immediately translate into increased SME lending, and may involve a time lag. Third, it is possible that, credit has become easier to come by and cheaper only for some SMEs, while other SMEs still find it very difficult, potentially even more difficult, to access bank finance. It should also be noted that despite the recent easing, credit conditions remained relatively tight in many places, especially where economic growth was still weak in 2013 and 2014.Equity financingEquity financing markets were severely impacted by the financial crisis. Most Scoreboard countries experienced a sharp decline in venture capital and growth capital investments between 2008 and 2010. This decline was uniform over venture capital for seed and early growth investments, later stage venture capital investments and growth capital investments (see Table 2.9). 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE50 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Table 2.9. Seed and early stage venture capital investments, later stage venture capital investments and growth capital investments, 2008-13Year-on-year percentage changesChanges in seed and early stage venture capital investments 2008 2009 2010 2011 2012 2013 2008-2013Austria -13 59 -60 164 -30 -1 17Belgium -23 53 -30 11 -11 -9 -4Canada -26 -21 -3 38 -22 6 -14Czech Republic -44 -100 … -79 -95 1357 560Denmark -41 -26 -22 23 -9 2 -34Estonia 758 48 -7 -59 258 -70 -40Finland,16 -18 13 -18 19 11 -1France 24 -33 4 -17 4 14 -31Greece 4886 -76 20 91 -100 … -95Hungary -3 -12 1094 123 66 -1 971Ireland 20 53 -11 -11 -7 -9 3Italy 75 -15 -9 -9 65 -39 -29Netherlands 25 -36 -9 11 -22 48 -25Norway -32 -16 21 -7 -24 -23 -45Portugal 82 -42 76 -81 29 77 -56Russian Federation … -23 24 78 46 … …Spain -1 -42 -13 49 -14 -27 -53Sweden 16 -43 -4 -20 -26 1 -67Switzerland -10 41 -16 26 -49 79 37United Kingdom 11 -33 -18 -6 32 -18 -44United States of America -1 -15 14 32 -9 19 39TOTAL 0 -23 -7 6 -5 0 -27Changes in later stage capital investments 2008 2009 2010 2011 2012 2013 2008-2013Austria -56 34 -9 73 -87 430 46Belgium -46 10 -74 6 69 4 -47Canada -66 -18 48 54 18 42 215Czech Republic 754 -10 … -21 -35 -82 -97Denmark 51 -78 -2 190 -59 3 -74Estonia 2 -100 … -31 103 -42 -79Finland -32 -33 1 -3 -55 312 20France -3 -16 -19 -15 -21 25 -43Greece -17 -19 -100 … -100 … -74Hungary 285 -98 556 -93 458 1276 -19Ireland -12 -58 156 -13 13 42 50Italy 49 -41 1 90 1 -13 0Netherlands -11 -53 -23 28 60 -32 -50Norway -48 -35 82 -51 36 -61 -70Portugal -63 -71 3 -77 32 57 -86Russian Federation -76 138 -57 108 … … …Spain 78 619 -39 13 -33 8 -88Sweden 32 -28 -20 -4 -20 21 -46Switzerland -62 16 -28 -30 180 -56 -27United Kingdom -3 -58 14 11 -48 -11 -76United States of America 286 -41 4 40 -1 -9 -22TOTAL -15 -42 -1 24 -8 12 -2851FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCESeed and early stage venture capital investments only surpassed 2008 levels in six out of 20 countries, notably Austria, Czech republic, Ireland, Korea, Switzerland and the united States. There are even fewer countries where later stage venture capital investments reached 2008 levels in 2012, with only Austria, Finland and Korea bucking the trend. Growth capital investments were also still below their 2008 peak in 2013 in most countries, with the exception of norway, portugal and Sweden.Equity market developments in 2013 were very mixed; in approximately half of the countries covered, overall equity investments rose, while they fell in the other half. The increases in venture capital in some countries were encouraging, however. Indeed, measures intended to support venture capital investment seem to have produced a positive effect in a number of countries, with public and private co-investment in venture capital programmes being the prominent tool, alongside direct government funding. regulatory changes also contributed to stimulating equity investment, as was the case in Ireland, Finland and Turkey.It should be noted that venture and growth capital investments continue to be very small compared with other funding sources such as bank lending, asset-based finance or trade credit. For example, in the united States, despite its vibrant equity market, data from the Small Business Administration shows that only around 300 of the 600,000 annual start-ups are funded by venture capitalists annually. Venture capital investments are also mostly limited to mature markets; around 85% of all venture capital investments in 2012 occurred in Europe and the united States and are thus relatively underdeveloped in many parts of the world (Ernst &Young, 2013).Changes in growth capital investments 2008 2009 2010 2011 2012 2013 2008-2013Austria 28 34 -33 286 -77 -2 -22Belgium 12 30 -30 -36 47 -13 -26Canada -23 -38 21 3 -7 18 -16Czech Republic -38 165 -39 -93 -45 5 -94Denmark 38 48 14 -97 590 -73 -92Estonia -89 85 -100 -100 … -100 -100Finland 111 -61 412 -77 76 -60 -68France 138 -25 24 40 -43 -18 -38Greece … … … -99 -100 … …Italy 83 -18 -10 -39 7 -27 -65Netherlands -16 11 -53 202 -50 -16 -33Norway 277 -28 -1 -4 33 11 2Portugal -18 31 -37 1590 -66 96 818Spain 88 -36 6 -52 -7 6 -68Sweden -29 171 30 -56 -44 21 5Switzerland 144 -44 178 -80 127 -63 -73UK 35 -37 27 -21 -19 24 -36TOTAL 39 -25 13 -11 -22 -1 -41Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015, European Venture Capital Association (2014).12 http://dx.doi.org/10.1787/888933194492Table 2.9. Seed and early stage venture capital investments, later stage venture capital investments and growth capital investments, 2008-13 (cont.) 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE52 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015For these reasons, trends in venture capital investment are difficult to analyse and interpret because of the extreme volatility in the data. In particular, just one large deal can cause volatility in countries where the market is not very well developed. Also, equity financing is only relevant to a small subset of SMEs with specific needs and characteristics. nonetheless, the importance of venture and growth capital should not be understated, as they fund SMEs with very high growth potential.Asset-based financeIt is widely acknowledged that SMEs are typically not able to finance themselves directly though the market and are more dependent on bank financing. As deleveraging of the financial sector continues, the reliability on bank finance is increasingly considered as problematic and alternatives to traditional bank lending are being explored and encouraged by governments. Asset-based finance, through which firms obtain financing based on the value of a particular asset generated in the course of its business, rather than on its own credit standing, is well-established, and widely used, alternative for many SMEs (see Box2.2).Box 2.2. Asset-based finance for SMEsAsset-based finance is a widespread form of finance for SMEs, to monetise the value of specific assets and access working capital under more flexible terms than they could from conventional lending channels. It comprises instruments such as asset-based lending, factoring, purchase order finance, leasing and warehouse receipts. As firms obtain funding based on the value of specific assets, including accounts receivables, inventory, commodities stored at certified warehouses, machinery, equipment and real estate, rather than on their own credit standing, asset-based finance can serve the needs of young and small firms that have difficulties in accessing traditional lending, because they are informationally opaque, lack credit history or face temporarily shortfalls or losses. In addition, asset-based financiers do not generally require any personal guarantee from the entrepreneur, nor that s/he give up equity. On the other hand, the costs incurred and/or the complexity of procedures may be substantially higher that those associated with conventional bank loans, including asset appraisal, auditing, monitoring and up-front legal costs, which may reduce the firm’s levels of profits. Also, funding limits are often lower than in the case of traditional debt.In its long-established forms of factoring and leasing, asset-based finance is widely used across OECD economies. In Europe especially, the relevance of these instruments for SMEs is on par with conventional bank lending, and the specific financial segment has grown steadily over the last decade, in spite of repercussions of the global financial crisis on the supply side. Factoring and leasing are also broadly diffused across emerging economies, and increasingly so in supply chain arrangements and cross-border activities. Their diffusion is favored by less stringent requirements, in terms of an efficient legal and judicial system, than traditional and asset-based lending.Indeed, a weak legal environment can be an important constraint to the development of asset-based lending, which has,mainly taken place in economies characterised by a solid framework for the protection of secured interests and efficient bankruptcy laws. In fact, in countries where this form of financing had already developed, its demand by SMEs has significantly increased in the aftermath of the 2008-09 global financial crisis, as awareness rose and access to other financing channels have become more difficult, and also as a consequence of regulatory changes.Source: OECD (2014c).53FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEAsset-based finance comprises every form of finance that is based on the value of specific assets rather than on the credit standing and covers different instruments. Among these, leasing and factoring are most known and widely used in most parts of the OECD. In the case of leasing, the owner of an asset provides the right to use of the asset (like motor vehicles, equipment or real estate) for a specified period of time in exchange for a series of payments.Analysis from Leaseurope,6 which provides recent data for 18 Scoreboard countries, shows that new production of leasing increased in five countries between 2012 and 2013 (Austria, Denmark, Greece, Slovenia and the united Kingdom), while decreasing in ten others (Belgium, Estonia, Finland, France, Italy, the netherlands, the Slovak republic, Spain, Sweden and Switzerland). Leasing volumes, which dropped precipitously in many European countries in 2009 as a result of the financial crisis, thus generally fell even further in 2013, signalling a very patchy and uneven recovery of leasing volumes.In 2013, new production had still not recovered to pre-crisis levels in 13 out of 18countries for which leasing data are available, with the exception of Belgium, norway, Sweden and Switzerland. Countries that suffered most under the financial crisis and where lending to SMEs contracted most, i.e. Italy, Greece, portugal and Spain, witnessed a much more dramatic decline in leasing volumes over the 2007-13 period as well. For these countries, new leasing volumes in 2013 were only of fraction of the pre-crisis level (see Table 2.10). More analysis is needed to assess the relative importance of Table 2.10. New production in leasing: 2007-13relative to 2007Country 2007 2008 2009 2010 2011 2012 2013Austria 1 1.08 0.71 0.77 0.83 0.65 0.73Belgium 1 1.11 0.82 0.96 1.08 1.13 1.02Czech Republic 1 0.98 0.5 0.56 0.59 0.54 0.54Denmark 1 1.15 0.78 0.75 0.93 0.89 0.97Estonia 1 0.78 0.26 0.31 0.51 0.65 0.61Finland 1 0.97 0.77 0.78 0.91 0.91 0.86France 1 1.04 0.84 0.92 1 0.98 0.94Greece* … 1 0.67 0.46 0.18 0.07 0.08Hungary 1 0.98 0.35 … … … …Italy 1 0.86 0.58 0.61 0.56 0.38 0.34Netherlands 1 0.99 0.68 0.6 0.72 0.8 0.74Norway 1 1.02 0.72 0.84 1.03 1.11 1.11Portugal 1 0.95 0.7 0.71 0.44 0.27 0.27Slovak Republic 1 1.15 0.65 0.7 0.8 0.8 0.78Slovenia 1 1.19 0.62 0.58 0.55 0.44 0.45Spain 1 0.7 0.35 0.44 0.35 0.28 0.27Sweden 1 1.05 0.76 0.96 1.02 1.23 1.2Switzerland 1 1.17 0.97 1.13 1.32 1.29 1.15United Kingdom* … 1 0.65 0.71 0.75 0.89 0.96*Base year is 2008.Source: Leaseeurope (2014).12 http://dx.doi.org/10.1787/888933194502 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE54 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015demand-side factors, especially the potential decline or postponement of new investments in equipment, real estate, automobiles and so on, and supply-side factors in order to explain these divergent trends. Figure 2.15 provides further evidence supporting the positive correlation between leasing volumes and SME lending. Countries where SME lending expanded on average over the last three years, such as Belgium, Denmark, France, the netherlands, norway, the Slovak republic and Switzerland, also experienced an uptick in the new production of leasing over the same period. In Austria, the Czech republic, Greece and portugal, both SME lending as well as new leasing volumes were down over the 2010-13 period. This suggests that leasing and potentially other sources of asset-based finance are pro-cyclical, like SME lending; when credit from banks dries up, the availability of leasing is also likely to decrease.Figure 2.15. Trends in the average SME loan growth and the new production of leasing, average year-on-year increase in 2011, 12 and 13In percentages151050-5-10-15-20-15 -10 -5 0 5 10 15AUT*BELCZEDEN*FIN*FRAGRC**NED*NOR**PRTSVKSVNESP* SWECHEGBRAverage SME new volumes, 2011, 12 and 13Average SME loan growth in 2011, 12 and 13Notes: * refers to countries with flow data on SME loans. ** refers to countries where data on SME loans is limited to 2012 and 2013. Definitions differ across countries. refer to table of definitions in each respective country profile in Chapter 4.Source: Leaseeurope (2014) and data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193533With the exception of Hungary, Ireland, Japan, norway, the Slovak republic and the united States, factoring volumes have generally expanded since 2007; volumes have often doubled between 2007 and 2013, and increased more than tenfold in China and Korea, albeit from a relatively low base. This implies that factoring has generally become a more widely used and accepted alternative to liquidity-strapped SMEs over the last seven years. The data also suggest that the availability of factoring was not severely impeded by the outbreak of the financial crisis, in contrast with many other sources of finance. Table 2.11 summarises using data from Factors Chain International (FCI)7.55FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEPayment delays, bankruptcies and non-performing loansStatistics on payment delays, bankruptcies and non-performing loans reflect problems in maintaining cash flows under different economic conditions. It was difficult to maintain cash flows when the recovery stalled and credit terms tightened, as happened in many OECD countries after the financial crisis in 2008. This uneven recovery, and even reversal, in many places, is underlined by the decline SME loan shares, the increase in interest rates and collateral requirements.Payment delaysInformation on payment delays covers 26 countries, some only partially, usually for the B2B sector of all sizes. In 2013, payment delays generally decreased in most countries. This follows an increase which began in 2009, to reach a peak in 2011or 2012, albeit with some regional differences. Increases in payment delays are usually due to insufficient availability of funds, cash flow constraints in companies, liquidity constraints among clients, counterparties entering bankruptcy or going out of business, Table 2.11. Factoring volumes, 2007-13relative to 2007Country 2007 2008 2009 2010 2011 2012 2013Austria 1 1.22 1.27 1.59 1.72 2.1 2.7Belgium 1 1.17 1.25 1.68 1.99 2.21 2.48Canada 1 0.7 0.76 0.87 1.24 1.66 1.33Chile 1 1.08 0.99 1.12 1.47 1.64 1.74China 1 1.67 2.04 4.69 8.3 10.42 11.47Colombia 1 1.03 1.18 1.37 2.46 2.25 3.49Czech Republic 1 1.05 0.79 0.92 1.07 1.09 1.11Denmark 1 0.65 0.84 0.94 1.08 1.04 1.05Estonia 1 1.1 0.77 0.94 0.9 1.44 1.46Finland 1 1 0.85 0.98 1.03 1.34 1.4France 1 1.11 1.05 1.26 1.43 1.53 1.65Hungary 1 1.03 0.81 1.08 0.91 0.86 0.86Ireland 1 1.05 0.84 0.88 0.8 0.87 0.93Israel 1 1.75 1.75 2.06 2.06 1.78 1.33Italy 1 1.04 1.01 1.17 1.43 1.48 1.45Japan 1 1.37 1.08 1.27 1.43 1.25 0.99Korea 1 0.94,3.08 5.32 8.47 8.38 12.92Mexico 1 1.04 0.23 1.58 2.29 2.84 3.05Netherlands 1 0.94 0.94 1.1 1.45 1.57 1.63Norway 1 0.88 0.89 0.89 0.96 1.07 0.96Portugal 1 1.07 1.05 1.23 1.65 1.36 1.32Russian Federation 1 1.23 0.65 0.93 1.62 2.69 3.2Serbia 1 1.64 1.81 2.21 4.1 4.2 3Slovak Republic 1 1.16 0.82 0.71 0.85 0.74 0.77Slovenia 1 1.43 1.43 1.43 1.21 1.43 1.38Spain 1 1.19 1.25 1.35 1.46 1.48 1.39Sweden 1 0.74 0.86 0.86 1.35 1.53 1.41Switzerland 1 1.03 1.99 1.59 1.37 1.19 1.23Thailand 1 1.06 0.94 0.94 1.38 1.94 1.49Turkey 1 0.92 1.03 1.99 1.57 1.62 1.63United Kingdom 1 0.66 0.68 0.79 0.94 1.02 1.08United States 1 1.03 0.91 0.98 1.08 0.8 0.86Source: Factors Chain International (2014).12 http://dx.doi.org/10.1787/888933194519 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE56 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015which are all affected by the economic environment with a considerable time lag. Of the 15 countries where data for both 2012 and 2013 is available, only two experienced an increase in payment delays in 2013, while 11 reported a decrease year on year, and the trend was flat in Denmark. In countries like Canada, Finland, Korea, new Zealand and the Slovak republic, payment delays in 2013 were lower than at the pre-crisis level of 2007 (Table 2.12).Table 2.12. Trends in payment delays 2007-13 Definition 2007 2008 2009 2010 2011 2012 20132012-13 Growth rate (in%)Austria B2B average days overtime 8 8 11 12 11 12 13 8.3Belgium B2B average days overtime ·· ·· 17 17 15 19 18 -5.3Canada 90-Day Delinquency Rate Small business 0.7 1 1.5 0.8 0.7 0.6 0.3 -45Chile B2B … … … … 45 43 41 -4.7Colombia 48.8 50.2 60.8 62.3 66.4 25.6 18.7 -26.9Denmark B2B average days overtime 7.2 6.1 12 12 13 12 10 -16.7Estonia B2B average days overtime 9 8 13 13 10 10 9 -10Finland B2B average days overtime 6 5 7 7 7 7 6 -14.3France B2B, SMEs (accounts receivable - advances paid)/ sales49.8 47.7 45.6 45.6 44.1 43.5 .. …Greece B2B average days overtime 4.6 4.3 6.7 8.7 14.1 23.4 … …Hungary B2B average days overtime 16.3 19 19 15 22 20 … …Ireland B2B average days overtime n.a. n.a. 22 25 30 31 … …Italy B2B average days overtime n.a. 23.6 24.6 20 18.6 20.2 19.9 -1.5Korea SMEs average days overtime 11 12.1 9.9 12.1 11.7 9.1 9.7 6.6Netherlands B2B average days 13.9 16 17 18 18 17 -5.6New Zealand B2B average days 43.1 50.8 44.5 44 45.6 40.1 39.6 -1.2Norway B2B average days overtime 7.4 7.3 11 8 9 9 … …Portugal B2B average days overtime 39.9 33 35 37 41 40 35 -12.5Serbia % all businesses overtime 34 31 31 36 … Slovak republic B2B average days overtime 19.7 8 13 17 20 21 19 -9.5Slovenia … … n.a. n.a. 32 30 … …Spain B2B average days overtime 6 4 15 12 6 11 .. …Sweden B2B average days overtime 6.9 7 8 8 8 7 7 0Switzerland B2B average days overtime .. 12 13 13 11 10 9 -12.5United Kingdom B2B average days overtime ·· ·· 22.8 22.6 25.7 24.7 24.6 -0.2United States % B2B .. .. .. .. .. .. 25.9 …Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933194526BankruptciesThe data on bankruptcies show a very diverse picture. 13 countries reported a decrease in the number bankruptcies in 2013, while 11 reported an increase. In a minority of countries, notably Austria, Canada, Chile, Greece, Japan, Korea and new Zealand, bankruptcies were below pre-crisis levels in 2013. Most of these countries, with the exception of Greece, were relatively sheltered from the financial crisis and the ensuing sovereign debt crisis. In contrast, in Denmark, Estonia, Hungary, Italy, portugal, Serbia, the Slovak republic and Spain, bankruptcies more than doubled over the 2007-13 period. Spain experienced an eightfold increase of the number of bankruptcies over the last seven years. In Belgium, the Czech republic, Hungary, Ireland, Italy, the netherlands, portugal Serbia, the Slovak republic, Spain, Sweden, Switzerland and Turkey, in 2013 the number of bankruptcies all exceeded their 2009 levels (see Table 2.13).57FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEWhile bankruptcy data over time are broadly indicative of the cash flow situation of enterprises, it should be highlighted there are differences in the length of the bankruptcy procedures between countries, so that insolvent enterprises are not declared bankrupt at the same pace. Comparisons across countries should therefore be treated with caution. Legal and regulatory reforms that were introduced over this period can also affect the numbers. This is the case in Turkey, whose threefold increase throughout the period can be partially attributed to the shortening of the length of the bankruptcy process.Table 2.13. Trends in bankruptcies 2007-13relative to 2007 (2007=1)Relative to 2007 (2007=1) 2012/2013 Growth rate (in%) 2007 2008 2009 2010 2011 2012 2013 Austria all firms 1 1 1.1 1.01 0.93 0.96 0.87 -9.6Belgium all firms 1 1.1 1.23 1.25 1.33 1.38 1.53 10.9Canada per 1 000 firms 1 1 0.94 0.71 0.65 0.58 0.52 -11.1Chile all firms 1 1.05 1.21 0.94 0.93 0.91 … …Colombia1 all firms … 1 1.57 1.67 1.87 1.22 … …Czech Republic all firms 1 1.04 1.53 1.55 1.51 1.6 1.64 2.5Denmark all firms 1 1.54 2.38 2.69 2.28 2.27 2.08 -8.5Estonia SMEs 1 2.09 5.22 5.09 3.08 2.45 2.27 -7.3Finland % of firms3 1 1.11 1.33 1.11 1.22 1.22 1.33 9.1France all firms 1 1.08 1.22 1.18 1.16 1.19 1.22 2.5Greece all firms 1 0.7 0.69 0.69 0.87 0.81 0.76 -5.5Hungary per 10 000 firms 1 1.1 1.39 1.52 1.83 1.97 2.46 24.9Ireland all firms 1 1.23 1.87 1.88 2.11 2.03 1.78 -12.4Italy all firms 1 1.22 1.52 1.83 1.97 2.04 2.3 12.8Japan all firms 1 1.11 1.1 0.95 0.91 0.86 0.77 -10.2Korea all firms 1 1.19 0.87 0.68 0.59 0.54 … …Netherlands2 all firms ·· ·· 1 0.89 0.88 1.05 1.18 12New Zealand all firms 1 0.69 0.7 0.85 0.76 0.68 0.61 -9.7Norway only SMEs 1 1.5 2.16 1.89 1.81 1.6 1.86 16.3Portugal all firms 1 1.35 1.46 1.57 1.82 2.56 2.31 -9.8Russian Federation1 all firms ·· 1 1.11 1.15 0.92 1.01 0.94 -6.6Serbia per 1 000 firms 1 0.68 1.06 1.22 1.42 2.41 … …Slovak Republic all firms 1 1.49 1.63 2.04 2.22 2.13 2.33 9.4Spain only SMEs 1 2.83 4.92 4.7 5.37 7.5 8.05 7.4Sweden only SMEs 1 1.09 1.32 1.26 1.2 1.29 1.33 3.1Switzerland all firms 1 0.98 1.21 1.45 1.54 1.59 1.51 -5.1Turkey all firms 1 0.9 0.96 1.31 1.38 2.71 … …United Kingdom all firms 1 1.23 1.51 1.32 1.4 1.34 1.21 -9.9United States all firms 1 1.54 2.15 1.99 1.69 1.41 1.17 -17.1Notes: 1. Base year is 2008. 2. Base year is 2009. 3.% of firms in bankruptcy proceedings.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933194531Non-performing loansThe evolution of SME npLs between 2007 and 2013 shows provides a diverse picture across Scoreboard countries. With the exception of Thailand, npLs increased dramatically between 2007 and 2009 in all 16 countries for which data are available. In Canada, Colombia, Estonia, Sweden, Thailand, Turkey and the united States, npLs decreased sharply after 2009, often bottoming out at a level lower than was observed in the pre-crisis period. npLs kept rising however in other countries; most notably those that experienced a 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE58 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015double-dip recession, such as Italy, Greece, portugal, Serbia and Spain (see Table 2.14). For these countries, 2013 did not mark a turning point, as npLs kept increasing from already historically high levels.,Chapter 3 provides an in-depth look at the issue of non-performing loans for SMEs; it includes a discussion of the challenges of using this indicator for cross-country comparisons due to differing definitions. It also provides an analysis of the broader implications of npLs for access to finance and economic growth.Table 2.14. Non-performing loans as a percentage of all SME loans, 2007-13relative to 2007 (2007 = 1)Country 2007 2008 2009 2010 2011 2012 2013Canada 90-Day Delinquency Rate Small business 1 1.33 1.86 1.04 0.76 0.67 0.42Chile** SME loans impaired more than 30 days late … … 1 0.93 0.86 0.84 0.95Colombia SME loans impaired or more than 90 days late1 1.4 1.92 1.4 1.08 1.08 1.22Czech Republic Business loans impaired or more than 90 days late1 1.36 2.58 2.93 2.67 2.4 2.33Estonia SME loans impaired or more than 60 days late1 3.78 7.76 8.61 6.65 5.45 3.44Finland Business loans more than 30 days late 1 1.34 2.31 2.2 2.18 2.08 2.19Greece SME loans impaired or more than 90 days late1 0.93 1.46 1.89 3.07 5.09 6.91Hungary* SME loans more than 90 days late … 1 1.65 2.37 2.94 4.13 3.44Italy SME loans being declared insolvent 1 1.06 1.25 1.38 1.54 1.75 2.1Korea SME loans more than 90 days late 1 1.97 1.66 2.44 1.87 1.76 1.76Mexico** SME loans impaired or more than 90 days late… … 1 0.8 0.77 0.64 …New Zealand** SME loans impaired or more than 90 days late… … 1 1.07 1.02 1 0.88Portugal SME loans impaired or more than 30 days late1 1.34 2.31 2.55 3.84 5.86 7.41Russian Federation*SME loans more than 90 days late … 1 1.77 2.06 1.92 1.96 1.66Serbia SME loans impaired or more than 90 days late1 1.57 2.81 3.13 3.37 3.93 4.23Slovak Republic**SME loans impaired or more than 90 days late… … 1 1.23 1.22 1.15 1.21Spain SME loans impaired or more than 90 days late1 4.96 8.45 10.93 15.73 21.7 …Sweden Business loans more than 60 days late 1 1.51 3.54 3.63 3.21 3.08 2.81Thailand SME loans more than 90 days late 1 0.86 0.96 0.57 0.46 0.42 …Turkey SME loans impaired or more than 90 days late1 1.34 2.2 1.25 0.85 0.87 0.86United States Loan delinquencies, 30 days past due, all sizes1 1.54 3.2 2.84 1.64 1.09 …Notes: * Base year is 2008. ** Base year is 2009.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933194545Government policy responses in 2013-14Governments responded to the global financial crisis and its effects on SME financing with a variety of instruments. The use of government loan guarantees to secure bank lending to SMEs continued to be the most widespread measure among countries participating in the Scoreboard. As Table 2.15 illustrates, these instruments gained importance in many countries as SME lending came under duress. In 2013, government loan guarantees 59FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEcontinued to be a prominent policy to support lending to SMEs. This comes after a major increase in the use of government loan guarantees in 2009 for countries such as Belgium, Chile, the Czech republic, Estonia, France, Israel, Italy, the netherlands, Spain and Turkey.Although a majority of these countries decreased the scope of their loan guarantee schemes in the ensuing years, particularly in 2011, government loan guarantees most often remained much more important in scope in 2013 than in 2007. In 12 out of the 18 countries for which data are available, governments spent more resources on government loan guarantees in 2013 than they did in 2007, the amounts invested often increasing by a multiple over this period. Furthermore, new elements were added to some of these programmes, such as “express guarantees” that could be granted in five days in Belgium, or the creation of new instruments outside the traditional guarantee programmes. In 2013, new counter-guarantee programmes were introduced in Austria and Spain. Chile adopted a new mutual credit guarantee programme, and has decided to increase the budget for the existing programme. The russian Federation established a new agency to provide guarantees to SMEs, which began operations in June 2014. Denmark granted more than DKK 1 billion in the first nine months of 2014, compared with DKK 920 million and DKK 496 million in 2013 and 2012 respectively.Table 2.15. Government loan guarantees for SMEs, 2007-13Country Unit 2007 2008 2009 2010 2011 2012 2013Change 2012-13Change 2007-13Austria EUR million 341 164 214 173 143 158 167 6 -51Belgium EUR million 78 157 412 554 318 266 480 81 517Canada CAD billion 1.2 1.3 1.2 1.3 1.3 1.1 1.1 0 -8Chile CLP billion 203 190 529 896 994 1 829 1 622 -11 700Colombia COP billion 2 201 4 846 6 842 6 671 9 275 8 495 9 246 9 320Czech Republic CZK million 1 925 3 529 6 369 6 593 472 1 534 3 251 112 69Denmark EUR million 23 17 21 92 147 153 106 -31 354Estonia EUR million 17 19 36 41 31 43 31 -27 87Finland EUR million 416 438 474 447 497 408 379 -7 -9France EUR million 5 850 6 861 11 267 11 883 9 826 8 465 8 925 5 53Greece EUR million 1 657 1 788 1 564 1 254 1 805 688 610 -11 -63Hungary HUF million 308 800 352 100 409 200 377 100 343 400 251 850 350 009 39 13Israel NIS million 170 109 757 1 028 890 1 412 2 025 43 1 091Italy EUR billion 2 2 5 9 8 8 11 32 370Japan JPY billion 29 368 33 919 35 850 35 068 34 446 32 078 29 778 -7 1Netherlands EUR million … 400 370 945 1 040 590 415 -30 4Russia RUB million .. .. .. 32 460 58 954 87 400 116 900 34 …Slovak Republic EUR million 82 99 81 70 84 87 38 -56 -53Spain EUR million 5 550 7 700 11 000 10 100 12 000 11 000 13 000 18 134Turkey TRY million 53 285 565 939 1 123 1 114 1 061 -5 1 906United Kingdom GBP million .. .. 94 79 49 43 51 17 -46United States USD billion 21 16 15 22 19 23 23 -1 9Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933194552In 2013 and the first half of 2014, many initiatives were introduced to stimulate innovative start-ups and high-potential SMEs. Most commonly, these initiatives sought to promote equity investments, mainly risk capital provided by venture capital funds and business angels. Austria introduced the ‘Jungunternehmer-Offensive’ in January 2013, which should ease access to alternative financial instruments for SMEs. The Canadian prime Minister announced the Venture Capital Action plan in January 2013, a comprehensive 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE60 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015strategy for deploying CAD 400 million in new capital over the next 7 to 10 years to reinvigorate the venture capital sector in Canada. Moreover, Canada will pilot its ‘immigration investor venture capital programme’ in 2015, whereby immigrants entering the country under this programme have to invest a significant amount of capital in seed and early stage companies over a long period of time. The Chilean Government created new funds of seed capital for early-stage start-ups and strengthened the Start-up Chile program that offers equity-free financing to start-ups. A dedicated SME trading platform was created in France in May 2013: Enternext. This subsidiary of nYSE Euronext is dedicated to market capitalisations below Eur 1 billion and covers the existing markets (compartments B, C of nYSE Euronext and Alternext). In October 2014, France modified its regulatory framework to enable equity crowd funding. The Baltic innovation fund was set up in 2013, so as to create more equity investments in Estonia and the other Baltic countries.,Finland introduced a growth financing programme in 2014, whereby the government will invest in growth start-ups and where every euro of private money will be matched by at least one euro of private investment. Greece set up the new Economic Development Fund (Taneo) in 2013, which will take minority participations in venture capital funds. The Italian Ministry of Economic Development opened the first call for the new Fund for Sustainable Growth. The endowment of the fund amounts to Eur 300 million, 60% of which is reserved for SMEs. The Swedish Government is also strengthening the budget for its current venture capital programmes.Some governments have also recently introduced tax incentives to boost innovation and the creation and development of fast-growing SMEs. In Turkey, business angel investors are able to deduct up to 75% of capital invested in SMEs from the annual tax base since 2013. This deduction ratio can increase to 100% for those angel investors supported by the Ministry of Science, Industry and Technology, the Scientific and Technological research Council of Turkey and the Small and Medium Enterprises Development Organization in the last five years. Since June 2013, Finnish SMEs are eligible to receive tax breaks for hiring r&D personnel. The tax breaks are restricted to the salaries of firms’ r&D personnel and are capped at a maximum tax deduction of Eur 400,000. In December 2013, Sweden introduced a tax break for private business angel investors. The government has set aside SEK 800 million annually, in order to allow for tax relief corresponding to up to 15% of investments. Sweden will also launch an Innovation Council in 2015, chaired by the prime Minister, to explore ways to foster entrepreneurial innovation.Other governments are encouraging the start-up and expansion of high-potential and innovative SMEs through explicitly targeted guarantee schemes, direct government lending programmes and advice and consulting services. For example, Austria changed the guidelines for its SME guarantee programme in July 2014 so as to focus more on innovative start-ups. In 2013, substantial new credit lines for Chile’s risk capital funds, for which only SMEs with high growth potential are eligible, were approved. The Czech republic piloted its InOSTArT programme, designed to ease the access to finance for innovative start-ups by providing guarantees and strategic advice. Hungary recently increased funding for innovative companies and tripled the amount of subsidised financial instruments, with a strong focus on the target group eligible for non-refundable grants, i.e. SMEs from the processing industry with the capacity for high growth. Starting from May 2013, new Zealand will distribute over nZD 31.3 million of repayable grants to high-growth early-stage enterprises commercialising intellectual property over a four-year period. Innovation norway provides direct loans, guarantees and grants to innovative projects in norway, both in established firms and in start-ups. Spain introduced several programmes in 2013 61FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEto finance innovation business project for an estimated total of Eur 1 billion. Turkey introduced its Venture Capital Fund with the explicit aim to foster SMEs with a potential to develop and produce innovative products, processes, information, or technology that can provide added value to the country’s economy.Table 2.16 summarises the broad types of measures undertaken in the Scoreboard countries between 2007 and 2013. These measures carry different costs for public budgets, including some with significant costs (e.g. government direct lending and loan guarantees); some that are cost neutral (e.g. bank targets for SME lending) and some with even negative costs (e.g. negative interest rates for bank deposits at the central bank). These measures also imply varying degrees of engagement by public agencies. This table confirms that loan guarantees are the most widely used instrument employed by a large majority of Scoreboard countries, followed by venture capital, equity funding, business angel support and direct lending to SMEs.Table 2.16. Government policy responses to improve SME access to finance, 2007-13Policy response CountriesGovernment loan guarantees Austria, Belgium, Canada, Chile, Colombia, Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Israel, Italy, Japan, Korea, Mexico, the Netherlands, Norway, Portugal, Russian Federation, Serbia, Slovak Republic, Slovenia, Spain, Switzerland, Thailand, Turkey, United Kingdom, United StatesSpecial guarantees and loans for start upsAustria, Canada, Czech Republic, Denmark, Estonia, Mexico, the Netherlands, New Zealand, Serbia, United KingdomGovernment export guarantees, trade creditAustria, Belgium, Canada, Colombia, Czech Republic, Denmark, Estonia, Finland, Hungary, Greece, Korea, the Netherlands, New Zealand, Spain, Sweden Direct lending to SMEs Austria, Belgium, Canada, Chile, Czech Republic, Estonia, Finland, France, Greece, Hungary, Ireland, Israel, Japan, Korea, Norway, Portugal, Serbia, Slovak Republic, Slovenia, Spain, Sweden, Turkey, United Kingdom Subsidised interest rates Hungary, Portugal, Russian Federation, Spain, Turkey, United KingdomVenture capital, equity funding, business angel supportAustria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Israel, Mexico, the Netherlands, New Zealand, Norway, Portugal, Slovak Republic Spain, Sweden, Turkey, United Kingdom SME banks Czech Republic, France, Portugal, Russian Federation, United KingdomBusiness advice, consultancy Colombia, Czech Republic, Denmark, Finland, the Netherlands, New Zealand, SwedenTax exemptions, deferments Belgium, Finland, Italy, New Zealand, Norway, Spain, Sweden, TurkeyCredit mediation/review/code of conductBelgium, France, Ireland, New Zealand, SpainBank targets for SME lending, negative interest rates for deposits at central bankIreland, DenmarkCentral Bank funding to banks dependent on net lending rateUnited KingdomSource: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.As Table 2.16 illustrates, in most Scoreboard countries, there already are many programmes in place to facilitate access to finance for SMEs and entrepreneurs at all levels of government. Surveys and experience show that these are not always well known by their target audience, and hence often underused. Some governments are therefore working actively to promote awareness of already existing government initiatives. The Canadian and Dutch Governments, among others, are exploring ways to rationalise and popularise current schemes rather than develop new instruments. The Irish Government is taking the same approach and has developed an online tool for exactly this purpose. By answering eight questions, business owners and entrepreneurs are directed to the State supports for which their company may qualify. 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE62 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015It is important to improve the ability of policy makers to monitor the policy environment and evaluate the cost effectiveness of the measures implemented to support SME finance. Indeed, many governments all over the world are also increasingly aware of the importance and relevance of policy evaluation, to adapt and improve existing SME finance policies. Canada, for example, is reviewing its loan guarantee scheme, the Small Business Financing program. Israel, is similarly,evaluating its broad SME policies with particular focus on its fast growing loan guarantee scheme. Chinese policy-makers are taking measures to cut charges and fees for SME bank loans, and exempt some relevant administrative fees in 2013; it will evaluate the effect of these efforts and adapt policies on this basis. This OECD Scoreboard is taking steps to harmonise the collection of information on government policies to promote SME access to finance by SMEs and entrepreneurs (see Annex C).Summing up and looking aheadMost OECD countries experienced negative GDp growth in 2008 and 2009. Since then, the recovery has been uneven across countries and mostly weak. In many European countries, the recession was quickly followed by another one as the sovereign debt crisis erupted. Even in 2013, six years after the start of the financial crisis, growth remained sluggish in many OECD countries and was too weak to bring unemployment levels close to the pre-crisis levels. Growth also decelerated in many emerging economies such as China, Mexico, the russian Federation, and Thailand.The Great recession exerted a severe negative impact on the access to finance of SMEs. The slump in both domestic and foreign demand translated into a heightened risk aversion from banks, especially with regard to less creditworthy borrowers. Credit to business dried up as a consequence; this was particularly the case for SMEs.8 This reduced supply of credit was exacerbated by a reduced availability of internal funding as a result of the challenging environment and declining profits. In 2013, the credit supply to SMEs had often not fully recovered from the financial crisis, stabilising at levels lower than observed in 2007 in some countries, and continuing to decline in others. It should be stressed that the figures in this chapter are nominal and thus underestimate the decline in SME lending in real terms. Many central banks loosened monetary policy considerably, lowering their lending rates to levels close to zero and engaging in unprecedented monetary easing through the large-scale purchases of mortgage-based securities and long-term treasury bonds. These measures brought interest rates down for firms of all sizes, but mostly for larger enterprises. SMEs in countries under duress, in particular, still had to pay relatively high interest rates compared to their larger peers. Credit conditions were generally improving, but remained tight on average compared with the pre-crisis years, and they were generally much more favourable for large enterprises.Another issue weighing on SME finance is the continued deleveraging of the banking system in many Scoreboard countries and the effect of financial regulation such as Basel III and similar regulation on the financial health of the financial sector and its willingness to expand credit to SMEs. In addition, the financial system in many countries is weakened by deterioration in asset quality as witnessed by the increase of the level of non-performing loans. Although the definition of non-performing loans (npLs) differs across countries, the Scoreboard often shows an increasing trend in npLs, after a protracted period of weak or even negative economic growth. This is a clear indication of the worsening of the asset portfolio in many banks, which will most likely weigh on credit expansion in the next 63FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEyears to come. SMEs are more likely to suffer from the increase in banks’ risk aversion, particularly in the light of a large share of SME npLs compared to those of large firms.The availability of bank lending will most likely remain subdued in the foreseeable future. Furthermore, the situation of venture and growth capital investments, which have fallen substantially since the financial crisis and proved to be even more pro-cyclical than traditional bank lending, is also of concern. Although most equity markets recovered somewhat in 2013, the level of investments generally remained well below pre-crisis levels. Venture capital funds nowadays are investing less, at a later stage and on tougher terms (Ernst&Young, 2013). policy initiatives to foster equity investments have been developed or are being considered by many countries, as more governments identify venture and growth capital as a key area to improve the growth potential of their economies.In addition, greater attention is being focused on the development of non-bank financing instruments such as asset-based finance, alternative debt, crowdfunding and hybrid instruments. Box 2.3 provides information on the phenomenon of crowdfunding along with some early trends of this new instrument. In addition, the securitisation market has seen resurgence in the last few years. Box 2.4 provides information on the SME securitisation market, which remains relatively undeveloped and is facing some specific barriers to its further expansion. The OECD Scoreboard will continue to monitor developments in these emerging instruments and their potential to fill the SME financing gap.The economic prospects for 2014 and 2015 appear somewhat more promising than in recent years, as modest positive economic growth is expected and uncertainty subsides, although the prospects differ from one region to the other. Despite the recent downward revision of GDp forecasts in Europe, lending to SMEs is expected to pick up, albeit with many caveats. The ECB’s quarterly lending survey indicated that banks relaxed credit standards for all types of loans in the three months to June 2014 in the Euro zone. Although the banking and financial markets remain fragmented, as financing conditions still evidence a high degree of heterogeneity, this fragmentation is expected to subside over Box 2.3. Crowdfunding and SMEsCrowdfunding is a finance technique that uses the internet to match investors and borrowers for projects of common interest. A social motivation is always present in this matching. In non-financial crowdfunding, investors are attracted by some characteristics of the project (e.g. their local engagement, possible job creation) and donate money without pro-quo, sometimes in exchange for a pre-order of a product, or a ticket to a show. In financial crowdfunding, there is also an expected monetary return.Financial crowdfunding can be classified in peer-to-peer lending and crowdinvesting. The main benefit of crowdfunding is that it closes part of the finance gap that firms observe. It also brings non-financial benefits, such as validation of r&D outputs, an estimation of the potential demand for a product, and brings in knowledge, network and expertise from founders. Crowdfunding also presents some risks, notably, risk of failure, fraud, and lack of an exit option.Crowdfunding as a funding source for projects has been increasing rapidly since 2009 (first year with records of activity), although total amounts still remain small when compared to bank finance or seed and early stage equity funding. The figures below show the amounts invested in Europe in 2013 through crowdinvesting (chart on the left) and the online SME loan market in the united States (chart on the right), which comprises peer-to-peer lending, but also some other online instruments for which lenders seek purely a financial return, and that are suited for working capital needs as well. 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE64 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Figure 2.16. Crowd investments in the United States and Europe2 0001 5001 0005000600010020030040050050-100 1001 8001 300A. Crowdinvesting,in Europe, 2013 (EUR million)B. Online SME loan market in the United States,total debt capital outstanding as of 4Q 2013BankLoans BusinesscreditcardsEquipmentLeasingFactoringMCASBAOnlineAltern-ativesCrowd-investing Seed capital Start-ups Later stageSource: A. EVCA (2014), B. Mills and McCarthy (2014).12 http://dx.doi.org/10.1787/888933193544There are a number of specificities to crowdfunding, which may impact its ability to finance SMEs. First, crowdfunding finances projects, not firms. It therefore alleviates only part of SME finance needs, but it is not suitable as the main funding source for firms and entrepreneurs, because it cannot cover working capital or growth needs unrelated to new projects.Second, crowdfunding depends on well-functioning bank instruments. Bank accounts, credit cards, an online payment system and credit records are all necessary for crowdfunding to work. Amounts traded through crowdfunding are relatively small and, so far do not present a systemic risk. Moreover, there is no leveraging of finance, as the amounts lent go directly to project financing.It will be necessary to monitor the evolution of this instrument, in order to assess the appropriate regulatory environment for crowdfunding. To do so, more information on this phenomenon is needed. At present, there is no publicly available data on the previous use of crowdfunding of the borrowers, to further assess their characteristics, the evolution of the amounts needed, and the projects financed. This information would be useful in identifying potential measure to support the use of crowdfunding as a finance instrument.Source: OECD (2014b).Box 2.3. Crowdfunding and SMEs (cont.)time. The relationship between sovereign debt and bank debt remains a concern, especially considering the fragile financial state and undercapitalisation of some European banks.GDp growth in the united States is forecast at 2.2% in 2014 and 3.1% in 2015 and credit to small businesses will likely expand modestly over that period. professional risk managers predict an increase in both the number of credits requested and, to a lesser extent, credits extended to small businesses, according to a recent survey.9 It remains to be seen how the anticipated tightening of the uS monetary policy will affect economic growth and SME access to finance.The nascent and uneven global economic recovery could be derailed, however. Both the IMF and the OECD consider that geopolitical risks have recently increased, as evidenced by developments in ukraine and the Middle East, which cast doubt on the economic recovery. 65FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCEBox 2.4. Non-bank debt financing for SMEs: The role of securitisationSecuritisation is a structured finance instrument involving the pooling of assets, the risk-tranching of liabilities backed by the newly-created asset pool and the subsequent sale in the capital markets of tranched claims on the cash flows backed by this pool. SME-related securitisations are performed through the pooling of a large number of SME assets (e.g. claims, cash flows, loans, and leases) by a financial intermediary.Taking the example of an SME loan securitisation (SME CLO, collateralised debt obligation), the ultimate goal of the transaction is the transformation of a portfolio of SME loans originated by a bank or another financial intermediary into a publicly issued debt security. The resulting security is not only tradable, transferrable and liquid but also ring-fenced and isolated from their originator.Securitisation played a prominent role in the build-up to the 2008 financial crisis and was tarnished when highly complex and opaque securitisation structures, especially those related to the uS subprime mortgage market, defaulted beyond expectations. While many other securitisations, especially in Europe, performed well, these events stigmatised the entire securitisation industry. problems that the crisis brought to the fore, like potentially inadequate regulation for some types of securitisation, complex structuring, misalignments of interest between originators and investors leading to under-pricing of risk, as well as lenient practices by credit rating agencies have since been addressed by policy makers and the industry. regulators are promoting “high quality securitisations”, the industry engaged in a prime Collateralised Securities (pCS) labelling initiative, and credit rating regulations and methodologies for structured products were thoroughly overhauled.resurgence of securitisation in the aftermath of the financial crisis has been swift in the united States, although SME securitisation has remained relatively underdeveloped compared to other securitisation classes. SBA loans, partially guaranteed by the uS Small Business Administration, have a leading role in uS SME securitisation. In Europe, likewise, the share of SME securitisation in total securitisation issuance is small. It is driven to a large extent by the eligibility of the instrument as collateral for refinancing monetary operations with the ECB. Figure 2.17. SME Securitisation in the United States and Europe350100908060705020304010020181614121086420510152025301985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320002001200220032004200520062007200820092010201120122013In Eur bn (LHS) and in per cent of total issuance (RHS)ABS outstanding in the United States, in USD bn0 0 0.30.50.81.11.51.9 2.43.24.35.77.38.49.711.513.314.515.717.519.923.226.429.029.930.030.732.633.22.0%10.3%7.3%4.1%4.8%9.7%5.2%17.0%6.6%15.4%10.5%16.8%18.0%11.2%A. Small business loan administration B. SME securitisation issuance in EuropeSource: SIFMA, Bloomberg, Dealogic, Thomson reuters, prospectus filings.12 http://dx.doi.org/10.1787/888933193556The revival of a healthy, safe and high-quality securitisation market can be a way to generate alternative capital market funding for SMEs, while providing banks with capital relief that allows for the unlocking of resources and further on-lending to the real economy. Institutional and long-term investors who have the scale and resources available would be able to participate in SME financing through this market. Efforts 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE66 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Structural reforms are also required in many countries in order to ensure the durability of the economic recovery (IMF, 2014, OECD, 2014d). Finally, downward pressures on already very low levels of inflation create deflationary risks in many Scoreboard countries.All in all, credit to SMEs will remain challenging in the years to come. Despite some encouraging signals, credit conditions will remain strict in 2014 and 2015. Credit to SMEs is expected to recover only modestly due to both demand and supply factors in many Scoreboard countries. Since the financial crisis erupted, governments around the world have initiated policies to ease access to finance for SMEs. The Scoreboard shows that these policies are largely still in place in 2013, and are often expanding in scope and scale. In addition, new policies are being developed with a particular,focus on innovative firms and equity instruments. The Scoreboard indicators will continue to gauge how financing conditions and access to SMEs and entrepreneurs evolve over time, and what effect policies will have on SME lending and the development of non-bank financing instruments.Notes1. Financial conditions indices are an extension of monetary policy indices, often used to evaluate the effect of monetary policy on economic activity. It does not only include changes in the exchange rate and short and long term interest rates, which are typical monetary policy indices, but also changes in credit availability for households and firms, corporate bond yields (or the spread with respect to government bonds) and household wealth, usually measured by equity and house prices. An increase in the financial conditions index implies that financial conditions have become more inductive for economic growth (see Guichard et al., 2009 for more information).2. A credit default swap (CDS) is a financial instrument to hedge the exposure to credit risk, which could be considered an insurance against for a loan default (or another credit event specified in the contract). The CDS spread is the premium the buyer of the CDS has to pay to the seller, which will have to cover the losses in case of a default and is similar to an insurance fee. CDS spreads are proportional to the risk associated with the underlying asset; in this example, declining CDS spreads signal that financial markets deem a default of peripheral economies in the Eurozone as less likely.3. See http://www.ecb.europa.eu/pub/pdf/other/financialintegrationineurope201404en.pdf?761c6bda155e07247154d37621973262 for more information on how financial integration in the Euro area is measured.for such revival should be underpinned by regulatory and policy support that should be well-balanced and avoid unintended consequences (e.g. crowding out, distortion of risk-pricing). Specific crisis measures like central banks’ asset purchase programmes can help kick-starting the market, and sensible calibration of critical regulatory workstreams affecting securitisation (including harmonising regulatory treatment of similar instruments like covered bonds) can support long-term viability of securitisation especially in the SME segment. There is also a role for public financial intuitions (or the uS government sponsored enterprises) to provide credit enhancements and liquidity to that market segment.For SME securitisation in particular, there are specific structural impediments that need to be overcome, like a paucity of credit data and asymmetric information. Improving data availability and transparency, e.g. via DataWarehouse platforms, as well as standardisation can help to address some of these problems. In addition, raising awareness among SME entrepreneurs about available financing options should help enhance competition between (and innovation by) finance providers, and should also be among the issues to be addressed by public policymakers.Source: nassr and Wehinger (2014).Box 2.4. Non-bank debt financing for SMEs: The role of securitisation (cont.)67FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE4. As the percentage in Finland is proxied by the percentage of respondents reporting more stringent collateral requirements, and the portuguese data only takes real estate into account, the data from these countries are not comparable at all with information gathered on the collateral requirement in other countries.5. The ECB Survey on SME access to finance is undertaken every six months to assess the latest developments in the financing conditions for firms in the Euro area. Among the most important questions are: was there a deterioration in the availability of bank loans, in the willingness of the banks to lend; what was the outcome of the loan application (granted in full or rejected) and did interest rates and collateral requirements increase or decrease. A joint ECB/EC survey round is conducted every two years for all the Eu member states and some additional countries.6. The European Federation of Leasing Company Associations (Leaseurope) is an umbrella company for both the leasing and automotive rental industries in Europe and is composed of 44 member associations in 34 countries. It publishes European-wide statistics on the leasing industry and covers approximately 92% of the European leasing market.7. Factors Chain International is an umbrella organisation for factoring organisations and currently has over 275 members in 74 countries.8. This is not uncommon. The economic literature points out that bank lending to SMEs is especially vulnerable in times of crisis (ECB, 2013).9. Consumer credit risk – north America trends and expectations, second quarter 2014, A survey by the professional risk managers’ international association, July 2014. http://www.fico.com/en/wp-content/secure_upload/FICO-2nd-Quarter-July-2014-Survey.pdfReferencesBank of England (2014), Credit Conditions Survey, 2014 Q3. http://www.bankofengland.co.uk/publications/Documents/other/monetary/ccs/creditconditionssurvey141007.pdfBank of Japan (2014a), Short-Term Economic Survey of Enterprises in Japan, September 2014. http://www.boj.or.jp/en/statistics/tk/gaiyo/2011/tka1409.pdfBank of Japan (2014b), Senior Loan Officer Opinion Survey on Bank Lending practices at Large Japanese Banks, October 2014. http://www.boj.or.jp/en/statistics/dl/loan/loos/release/loos1410.pdfConsumer credit risk – north America trends and expectations (2014), A survey by the professional risk managers’ international association, July 2014. http://www.fico.com/en/wp-content/secure_upload/FICO-2nd-Quarter-July-2014-Survey.pdfECB (2013), Survey on the access to finance of Small and Medium-sized Enterprises in the Euro area, European Central Bank, november 2013. https://www.ecb.europa.eu/pub/pdf/other/accesstofinancesmallmediumsizedenterprises201311en.pdf??acff8de81a1d9e6fd0d9d3b38809a7a0ECB (2014), Survey on the access to finance of Small and Medium-sized Enterprises in the Euro area, European Central Bank, April 2014. https://www.ecb.europa.eu/pub/pdf/other/accesstofinancesmallmediumsizedenterprises201404en.pdf??da920468528300ff549d8cc95522eb81Ernst & Young (2013), Turning the corner: Global venture capital insights and trends 2013. http://www.ey.com/Publication/vwLUAssets/Global_VC_insights_and_trends_report_2012/$FILE/Turning_the_corner_VC_insights_2013_LoRes.pdfEuropean Venture Capital Association (2014), EVCA Yearbook - 2013 European private Equity Activity. http://www.evca.eu/media/165475/yearbook-2014-europe-country-tables-final.xlsxDunkelberg, W. and Wade, H. (2014), nFIB Small Business Economic Trends, August 2014. http://www.nfib.com/Portals/0/PDF/sbet/sbet201408.pdfFactors Chain International (2014), Total Factoring Volume by Country in the last 7 years. http://www.fci.nl/about-fci/statistics/total-factoring-volume-by-country-last-7-yearsFederal reserve Board (2014), July 2014 Senior Loan Officer Opinion Survey on Bank Lending practices. http://www.federalreserve.gov/boarddocs/snloansurvey/201408/fullreport.pdfGuichard, S., D. Haugh and Turner D. (2009),“Quantifying the Effect of Financial Conditions in the Euro area, Japan, United Kingdom and United States”, OECD publishing, paris. http://dx.doi.org/10.1787/226365806132 2. rECEnT TrEnDS In SME AnD EnTrEprEnEurSHIp FInAnCE68 FInAnCInG SMES AnD EnTrEprEnEurS 2015 © OECD 2015Kraemer-Eis, H. and Lang, F. (2012), “The importance of leasing for SME finance”, EIF Working paper 2012/15. http://www.eif.org/news_centre/research/eif_wp_2012_15_The%20importance%20of%20leasing%20for%20SME%20finance_August_2102.pdfLeasEurope,(2014), Annual Survey 2013. http://www.leaseurope.org/uploads/documents/stats/European%20Leasing%20Market%202013.pdfIMF (2014), World economic outlook, update July 2014. https://www.imf.org/external/pubs/ft/weo/2014/update/02/pdf/0714.pdfLeaseurope (2014), Annual Survey 2013. http://www.leaseurope.org/uploads/documents/stats/European%20Leasing%20Market%202013.pdfOECD (2014a), OECD Economic Outlook, Vol. 2014/1, OECD publishing.DOI: 10.1787/eco_outlook-v2014-1-enOECD (2014b), new approaches to SME and entrepreneurship financing: Broadening the range of instruments, CFE/SME(2013)7/rEV2.OECD (2014c), Crowdfunding as a finance source for SMEs and entrepreneurs, forthcoming – available as CFE/SME(2013)7/rEV2/Ann1.OECD (2014d), OECD Economic Outlook, Vol. 2014/2, OECD publishing. DOI: 10.1787/eco_outlook-v2014-2-enOxford Economics (2011), The use of Leasing amongst European SMEs: a report prepared for Leaseurope, november 2011. http://www.leaseurope.org/index.php?page=smesMills, G.K., and McCarthy, B. (2014), The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game, Harvard Business School, Working paper 15-004, July 22, 2014. http://www.hbs.edu/faculty/Publication%20Files/15-004_09b1bf8b-eb2a-4e63-9c4e-0374f770856f.pdfnassr, I.K., and Wehinger, G. (2014), “non-bank debt financing for SMEs: The role of securitisation, private placements and bonds. Discussions at an OECD Financial roundtable”, OECD Journal Financial Market Trends, vol. 2014/1.World Bank (2014), World Development Indicators 2014. DOI: 10.1596/978-1-4648-0163-169Financing SMEs and Entrepreneurs 2015 An OECD Scoreboard © OECD 2015Chapter 3Non-performing loans: Insights fromthescoreboard on sme financeThis chapter examines the issue of non-performing loans (NPLs) and their impact on SME lending and financial stability. It draws on findings from four editions of Financing SMEs and Entrepreneurs: An OECD Scoreboard, the economic literature and country experiences. The chapter highlights the challenges in analysing NPLs, given the wide differences in definition and classification of these loans. It includes case studies provided by experts from countries participating in the OECD Scoreboard.FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 201570 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCEthe ratio of non-performing loans (npls) as a proportion to all business loans functions has long been used as a proxy to gauge the overall asset quality of the banking sector. A higher relative number of npls points to a lower asset quality on average, and an increase in the proportion of npls indicates a worsening of banks’ balance sheets.high ratios of non-performing loans have an important impact on lending. Weak bank balance sheets translate into a reduction in the availability of credit, at higher interest rates and more stringent conditions. research by the European Central bank and the iMF, among other, shows that factors impacting banks’ balance sheet position significantly influence lending to firms (hempel and Sorensen, 2010 and De bock and Demyanets, 2012).this is particularly the case for SMEs, which are more likely to be affected by a deterioration of banks’ assets. this is because SMEs are seen as more risky and more likely to default than large firms. Furthermore, the ratio of non-performing SME loans is consistently higher for SMEs (see beck et al., 2008).however, analysis of the data on npls in Financing SMEs and entrepreneurs highlights the shortcomings of this indicator, particularly in the context of cross-country comparisons, but also within a single country over time. indeed, differences in definition of npls and the level of stringency with which npls are calculated can have a significant impact on the resulting figures. there is therefore a need to improve the transparency surrounding this indicator as well as work towards better harmonisation.this chapter provides a first discussion of the importance of improving the analysis of npls, which is critical for sound decision-making on the part of banks and for access to finance for SMEs. Section 2 of this chapter focuses on the different definitions of npls used in the OECD Scoreboard, which vary substantially from one country to the other, and offers some guidance on how to interpret the data. Section 3 describes the evolution of npls using Scoreboard data from 2007-13. this data shows very large cross-country differences, both in the absolute level of npls as well as changes over time since 2007. Section 4 offers possible explanations for these cross-country differences and discusses the potential impact on SME lending and economic growth. Sections 5 and 6 contain case studies with detailed information on Chile and Spain respectively. Section 7 concludes.Defining non-performing loansthere is currently no international standard for the definition of non-performing loans, and the definition employed varies markedly across countries. looking across countries, a loan is generally considered non-performing if at least one of the following three conditions is met:1. the interest and/or the principal is overdue for more than a specific number of days, usually 90 days.71FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE2. the lender has identified an underlying well-defined weakness of the borrower or the loan which is further defined in greater detail by the iiF (institute of international Finance).3. the loan has been classified as ‘non-performing’ according to the frequently applied quality credit quality categories, as proposed by the iiF which rank loans in different categories. these categories are: standard, watch/special mention, substandard, doubtful and loss/write-off. the sum of the latter three categories typically corresponds to non-performing loans.As table 3.1 illustrates, the data on (SME) npls from the OECD Scoreboard usually refer to loans that have been overdue for a given period time, varying from 30 days to 90days. it should be noted, however, that loans that are not overdue (for more than 90 days), but whose repayment is considered as doubtful by their bank, are usually considered non-performing as well. given the wide variance in definitions, it is challenging to make reliable cross-country comparisons.First, npl data specific to SME loans are not always available (e.g. in the Czech republic, Finland, greece, Sweden and the united States), and the definition of an SME loan itself varies as well. this is problematic because SME npl rates differ substantially from npl rates for the overall business population. An analysis from the World bank shows that among banks operating in developed markets, the average ratio of SME npls stood at 6.93% in 2007, more than double the proportion of 2.54% for large business loans (beck et al, 2008), although this percentage differs from one country to the other and might also vary over time. Among banks operating in emerging markets, for example, the percentages were 6.5% and 4.1% respectively.table 3.1. Definitions of non-performing loans by countryCountry DefinitionCanada 90-Day Delinquency Rate Small businessChile SME loans impaired more than 30 days lateColombia SME loans impaired or more than 90 days lateCzech Republic Business loans impaired or more than 90 days lateEstonia SME loans impaired or more than 60 days lateFinland Business loans more than 30 days lateFrance Share of the outstanding loans of failing companies, SMEs except micro-enterprisesGreece SME loans impaired,or more than 90 days lateHungary SME loans more than 90 days lateItaly SME loans being declared insolventKorea SME loans more than 90 days lateMexico SME loans impaired or more than 90 days lateNew Zealand SME loans impaired or more than 90 days latePortugal SME loans impaired or more than 30 days lateRussian Federation SME loans more than 90 days lateSerbia SME loans impaired or more than 90 days lateSlovak Republic SME loans impaired or more than 90 days lateSpain SME loans impaired or more than 90 days lateSweden Business loans more than 60 days lateThailand SME loans more than 90 days lateTurkey SME loans impaired or more than 90 days lateUnited States Loan delinquencies, 30 days past due, all sizesSource: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/88893319456703_852015011_069-090.indd 71 14/04/2015 13:53:41 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE72 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Moreover, the number of days the repayment is overdue before being classified as non-performing has the potential to impact the numbers significantly. For example, in Korea, portugal and the united States, npls are defined as loans overdue for more than 30 days, while in Estonia and Sweden, the past due threshold lies at 60 days. the npl ratios in countries with lower thresholds are therefore overestimated in comparison to others. in the united States, for example, 1.23% of all small business loans were overdue for more than 30 days, but less than 90 days, in June 2014 according to paynet (a different data source than the one used in the Scoreboard). this figure changes to just 0.3% of small business loans overdue if the threshold is shifted to more than 90 days, but less than 180 days.in addition, loans that are considered as doubtful by a bank are usually considered non-performing, even when they are not overdue (for a long period of time), which may substantially inflate numbers (barisitz, 2013). in Chile, for instance, 5.8% of all SME loans were overdue by 90 days or more in 2013. by including loans that were not overdue, but defined as non-performing nonetheless, this figure increases by 0.5 percentage points. including loans that are doubtful and overdue by more than 30 days, but less than 90 days, adds another 0.4 percentage points to the SME npl ratio, bringing the total up to 6.7% (SbiF). On the other hand, until the end of 2008 in Chile, the npl ratio was calculated based only on the share of a loan amount whose payment was behind for at least 90 days, and so the remaining part of the loan amount was classified as not having defaulted (see also below).the second criterion of identifying a weakness on the part of the debtor and/or the loan leaves significant room for interpretation, both from regulators and from the banking sector. in portugal, for example, this is limited for loans for which the debtor is bankrupt or in liquidation, whereas weaknesses are interpreted more broadly elsewhere. Additionally, the classification of “non-performing” may even vary from one bank to the other, as is the case in new Zealand. Many additional factors can lead to an overestimation or underestimation of official npl ratios in one country compared to another even if both appear to employ similar definitions. restructured loans, for example, may not always be considered to be npls, and may depend on the banks’ discretion in some countries. Moreover, some banks do not consider loans to be non-performing if they are backed by collateral or guarantees, since they do not expect future losses on these types of loans. the question also arises whether the full outstanding value or only part of a doubtful loan is classified as non-performing, and whether a bank is required to downgrade all loans of a debtor with a loan that has been classified as non-performing. these factors all impact the level of absolute levels of npls and vary from one country to another, as barisitz (2012) demonstrates.Difficulties also exist when comparing trends in a given country over time. the definition of npls, and particularly how and when loans are considered as doubtful by the banking sector within a country, might evolve over time. For example, breaches of loan covenants may or may not lead to a default and foreclosure of a loan, and hence the classification of that loan as non-performing, depending on the enforcement of the bank. Similarly, common practices with respect of the use forbearance also vary internationally and from one bank to the other, which potentially impacts npl rates and official estimates of the asset quality significantly (EbA, 2014). Although information on the enforcement of covenants or forbearance is very difficult to obtain, it is not unreasonable to assume that the business cycle and other factors play a role in this. banks whose balance sheets are already burdened with many doubtful loans, for example, have more of an incentive to foreclose less quickly if covenants are breached. if that were the case, npls would be systematically underestimated in countries that have seen a sharp uptick of the npl 73FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCEratio. bankruptcy and collateral foreclosure procedures also determine the period of time non-performing assets remain on banks’ balance sheets and hence the data on npls. not only can the procedures themselves change over time, but it is also likely that bankruptcies and foreclosures take even more time in economic recessions, leading to a potential overestimation of both the level and the increase of npls in countries with relatively lengthy bankruptcy and collateral foreclosure procedures. how much the tightening of collateral requirements (as generally occurs in times of crises) affects the evolution of npls also depends to a large extent on the regulatory regime, and may impair cross-country comparisons, even of trends. box 3.1 illustrates some of these points by examining the case of italy.box 3.1. NPLs in Italy: the impact of the methodology on the dataEven within Europe, cross-country comparisons of npl ratios have to be treated with great care, as the example of italy demonstrates. in contrast to most countries, italian banks report their npl and coverage ratios based on prudential regulations set by the bank of italy, classifying loans as impaired on the basis of the borrower’s creditworthiness irrespective of the presence of collateral or guarantees. in a more hom*ogeneous cross-country comparison where italian banks’ npl were recalculated with methods in line with those adopted by many foreign banks, i.e. excluding loans entirely covered by collateral or guarantees, the italian banking system’s stock of non-performing loans would be 32% lower than that shown in the financial statements. it should be noted that this simulation excludes partial coverage by collateral or guarantees so that it reduces but does not fully eliminates the overestimation of italian non-performing loans in the international comparison (bank of italy, 2013). Also, over the last few years, italian banks have increased collateral requirements and reduced loan-to-value ratios. this has not resulted in a slowdown of the npl rate, due to the strict definition of npls.in addition, credit recovery procedures are particularly slow in italy, extending the period during which npls remain at the banks’ balance sheet which further increasing thereported npl ratios. the slowness of bankruptcy and foreclosure proceedings is greater in italy than in most other,countries and has probably increased during the recession, partly explaining both the rise of npls in italy, as well as the large stock of npls as a fraction of total corporate loans for italian banks. A confirmation of the relevance of this issue for italy is presented also in a recent iMF report on italy: “npls disposal is also hindered by the slow recovery process (three years to foreclose on collateral andseven years to complete a bankruptcy)”.thus, as a result of these two features which differ from those prevailing at the European level, italian npl ratios reported are significantly overestimated.Source: bank of italy (2013), iMF (2014).recognising the importance of this issue, the European Central bank has undertaken an exercise which will help advance the harmonisation of npl data (see box 3.2).Trends in NPLs over 2007-13: evidence from the scoreboardKeeping in mind the issues raised in the previous section, table 3.2 summarises the data on SME npls taken from Financing SMEs and Entrepreneurs. in 2013, whereas the level of SME npls remained below 1% in countries like Canada, Finland and Sweden, npl ratios reached levels above 10% in hungary, italy, greece, portugal, Serbia and Spain. in greece and Serbia, even more than one in four SME loans was non-performing in 2013. Although great 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE74 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015care has to be exercised in interpreting these data, given the large variation in definitions across countries, they broadly suggest a negative correlation between economic growth and the incidence of npls, in line with the economic literature (see Section 4).table 3.2 illustrates that, with the exception of Chile and thailand, npls increased in every country for which data are available between 2007 and 2010 as a consequence of the weak economic environment in 2008 and 2009. in 10 countries (Czech republic, Estonia, Finland, Korea, portugal, russian Federation, Serbia, Spain, Sweden and the united Kingdom), the SME npl rate more than doubled over this period.Figure 3.1 captures the year-on-year percentage change in npls in 2011, 2012 and 2013, which can be considered more comparable across countries than data on absolute levels, although this data also has it weaknesses as described in the previous section. As financial institutions tightened their credit standards after 2010, and economic growth began to recover from the financial crisis, albeit patchily and hesitantly, SME npls bottomed out from their 2010 peak in a majority of countries. in Canada, Colombia, Estonia, France, Mexico, russian Federation, Sweden, thailand, turkey and the united States, npls dropped significantly between 2010 and 2013, sometimes even to lower levels than observed during the pre-crisis period. in contrast, in hungary, italy, greece, portugal, Serbia and Spain, however, npls continued to rise after 2010 from already historically high levels, with only hungary witnessing a reversal of trends in 2013.box 3.2. The Asset Quality Review of the eCBthe lack of comparable data to assess banks’ asset quality, and the need for greater transparency, is well acknowledged. in its new role of direct supervisor of ‘significant European banks,’ the European Central bank (ECb) has conducted an Asset Quality review (AQr) of 131 banks in the Euro area. this review feeds into the stress tests by the ECb. the AQr and the stress tests together form the Comprehensive Assessment, a health check for the major banks in the Euro area. the ECb considers that restoring confidence in the Euro-wide banking system and strengthening banks that fail the stress tests is instrumental for financial and economic growth prospects in the Euro area.Streamlining the definition of non-performing loans and improving the comparability of asset quality measures across Euro zone banks is an important component of this review. A simplified version of the European banking Authority’s definition of non-performing loans will be used for this exercise. the standards on non-performing exposures and forbearance provide common definitions and reporting templates to allow supervisors to assess the level of forbearance activities and non-performing loans on a comparable basis across the European union, which should contribute to a coordinated approach of competent authorities to evaluate banks’ credit portfolios.this exercise revealed that 28% of all reviewed banks employed definitions that were less conservative than the AQr estimates. the internal definition was stricter than the AQr definition for 15% of all reviewed banks. implementing unified definitions and checking on a file-by-file basis whether exposures are correctly classified (by the so-called credit file review), significantly pushes up estimates of non-performing exposures with large regional variation. the estimated stock of non-performing exposures increased between 7% and 116% amongst debtor geographies by adhering to the relatively strict definition of the EbA. this result further underscores the need for a harmonisation of the definition of SME non-performing loans in order to allow meaningful cross-country comparisons.Source: EbA (2014), ECb (2014).75FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCEFigure 3.1. sme non-performing loans, 2011-13Year-on-year percentage change0.550.350.15-0.05-0.25-0.452012 20132011United StatesTurkeyKoreaColombiaEstoniaThailandSwedenCanadaCzech RepublicChileRussian FederationMexicoNew ZealandFinlandSlovak RepublicFranceSerbiaItalyHungarySpainPortugalGreeceSource: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193561Evidence suggests there is a strong negative relationship between SME lending and SME npls in Scoreboard countries (Figure 3.2). SME loan growth between 2012 and 2013 is negative for all countries that witnessed an increase in non-performing SME loans between 2010 and 2013, i.e. hungary, italy, portugal, Serbia and Spain. Chile, where npls increased only very modestly, is the only exception. Conversely, SME loan growth was positive in table 3.2. NPLs as a percentage of loans, 2007-13Country 2007 2008 2009 2010 2011 2012 2013Canada 0.69 1.01 1.47 0.79 0.71 0.6 0.33Chile … … 7.12 6.61 6.09 5.97 6.73Colombia 2.5 3.5 4.8 3.5 2.7 2.7 3.04Czech Republic 3.07 4.17 7.91 8.99 8.2 7.36 7.15Estonia 0.95 3.59 7.36 8.17 6.31 5.18 3.27Finland 0.27 0.36 0.63 0.6 0.59 0.57 0.6France 0.93 1.31 1.64 1.45 1.48 1.4 1.3Greece 4.6 4.3 6.7 8.7 14.1 23.4 31.8Hungary 5.4 8.9 12.8 15.9 22.3 18.6Italy 6.83 7.27 8.53 9.42 10.55 11.95 14.33Korea 0.93 1.83 1.54 2.27 1.74 1.64 1.64Mexico … … 5.6 4.5 4.3 3.6 …New Zealand … … 2.73 2.91 2.79 2.74 2.39Portugal 2.12 2.84 4.9 5.4 8.15 12.43 15.73Russian Federation … 4.27 7.56 8.8 8.19 8.39 7.08Serbia 6.72 10.56 18.86 21 22.64 26.39 28.43Slovak Republic … 6.81 8.36 8.29 7.85 8.27Spain 0.74 3.67 6.25 8.09 11.64 16.06 …Sweden 0.24 0.37 0.85 0.88 0.78 0.74 0.68Thailand 7.9 6.8 7.6 4.5 3.6 3.3 …Turkey 3.75 5.04 8.28 4.7 3.2 3.27 3.22United States 1.22 1.88 3.91 3.46 2 1.33 …Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933194573 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE,76 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015every country where the proportion of npls fell with the exception of the Colombia, the Czech republic, Finland and the united States. in greece, the sharp contraction of overall business lending and additional information from the Central bank of greece point to a further and sizeable fall in SME lending in 2013. As the fact that greek SME npls surged by 266% between 2010 and 2013, this supports the hypothesis of a negative correlation between SME lending and SME npls, in line with the economic literature (see Section 4).Figure 3.2. Trends in sme loan growth in 2013 and sme NPLs, 2010-13in percentages151050-5-10-15-20-65 -15 350 85 135 185PRTFIN*SRBCANITAKORFRANZLESP*SVKESTUSACHLCOLHUN2012/13 growth SME loansSME NPLs 2013 relative to 2010Notes:* refers to countries with flow data on SME loans. Definitions differ across countries. Excludes turkey (-31.5, 35.9). Data for greece for 2013 is not included due to changes in methodology.Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193578Sustained increases in the level of non-performing loans can also potentially impact credit conditions for SMEs and entrepreneurs, although evidence is patchy due to the scarcity of internationally comparable data on lending standards. Survey data from the European Central bank indicate that within the Euro area, it is in places where npl rates have increased most, such as greece, italy, portugal and Spain, that credit conditions are most restrictive and entrepreneurs consider access to finance as their most pressing concern.the interest rate spread, that is the difference between the average interest rate charged to an SME and to a large enterprise, also captures the tightness of credit conditions for SMEs and entrepreneurs. Figure 3.3 illustrates that there is a positive correlation between the interest rate spread in 2013 and the percentage increase in npls between 2010 and 2013, confirming the hypothesis that banks are more hesitant to supply credit to SMEs if an increasing proportion of the existing stock of SME loans are non-performing. the relationship between npls and interest rate spreads is strongest within the Europe. Outside the European union, Canada, new Zealand and the russian Federation also experience relatively high interest rate spreads, despite a falling proportion of npls; this may be attributed to their different institutional settings and business cycles. Chile and Colombia are also outliers, with Colombia experiencing a coincidence of declining npls and very high interest rate spreads. Similarly, the high interest rates charged to SMEs in these two countries most likely reflect deep-rooted characteristics common to many latin-American countries, such as the relative lack of depth in the region’s financial system, the low average productivity of the SME sector and relatively high inflation rates, rather than any evolution in the quality of their banks’ balance sheets (OECD/EClAC, 2012).77FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCEFigure 3.3. Trends in the interest rate spread in 2013 and sme NPLs over 2010-135.04.54.03.53.02.52.01.51.00.50-65 -15 0 35 135 18585PRTCZEFINSRBCANITARUSKORFRAUSANZLESPSWESVKESTHUNAverage interest rate spread between large firms and SMEs, 2013 SME NPLs 2013 relative to 2010Notes: Definitions differ across countries. Excludes Chile (1.8, 6.2) and Colombia (-13.1, 11.7)Source: Data compiled from the individual country profiles of Financing SMEs and Entrepreneurs 2015.12 http://dx.doi.org/10.1787/888933193587evidence from the economic literaturethere is an extensive literature on how the financial sector interacts with the real economy. Many models operate through a balance sheet effect: increases in asset prices improve the capacity to borrow for households, SMEs and large firms, which often leads to asset prices rising further, potentially resulting in a credit boom, boosting economic growth. Conversely, a deterioration of banks’ balance sheets decreases the willingness to lend, weighing on the real economy. this in turn worsens their average asset quality even more and hence may trigger a banking crisis and a downward economic spiral. this section explores the possible causes of increasing npls, as well as their economic consequences.Causes of increases of NPLsnon-performing loans can be the result of misfortune due to an unforeseen event (such as the unexpected failure of a borrower) or of dubious decisions on the part of the lender. One strand of the literature explores the latter avenue and emphasises the role of bank-specific characteristics in problem loans. the prevalence of npls varies from one bank to another depending on variables such as the efficiency of the bank and the quality of management (louzis et al., 2012).the total level of non-performing loans in a country is mainly driven by real gDp growth with a time lag of one or two years; non-performing loans become more prevalent in times of crisis when gDp output contracts. A sharp drop in the level of economic activity is the most pronounced risk for bank asset quality (beck et al., 2013). this is both because more firms are unable to repay their loans in times of economic hardship, and because loan growth stalls (or even turns negative) under these circ*mstances, causing the denominator of npl to business loans to decrease (and thus for the npl ratio to increase).Other factors driving npls include share prices, especially in countries where stock markets are well developed, and the interest rate. A decline in the former or an increase in the latter makes repayment of loans more difficult for some borrowers, pushing up the 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE78 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015npl ratio. the exchange rate also significantly impacts the level of npls in countries with pegged or managed exchange rates where lending in foreign currency without hedge is common (beck et al., 2013).Keeton (1999) was among the first to establish a clear and positive empirical relationship between loan growth and the delinquency ratio of business loans with a time lag of several years, using data from the united States. Critically, this relationship remains, even after controlling for the business cycle1; however, it only holds true when the loan growth is due to supply shifts (and thus not because of demand-side factors). this relationship is somewhat complex, however, and depends on the reasons behind the credit growth. More specifically, credit booms that are fuelled by an excessive easing of credit standards, as a result of increased competition in the banking sector or financial deregulation for example, are usually followed by an uptick of loan delinquencies a few years later. this empirical relationship has been confirmed for different regions and periods.2in Europe especially, the asset quality on banks’ balance sheets has generally deteriorated as a consequence of the macro-economic environment since the 2007 financial crisis and the ensuing sovereign debt crisis. the European Scoreboard countries currently facing the highest increase of npls also witnessed a pronounced deterioration in growth figures between 2008 and 2012. Credit-to-gDp ratios in the run-up to the financial crisis were also stronger,than average according to World bank data, most likely also contributing to the high levels of npls currently observed. in Serbia, the exchange rate was a major contributing factor in the recent rise of npls (Vukovic and Domazet, 2013). Exchange rate evolutions also lie at the heart of the deterioration of banks’ asset quality in hungary and other countries in Central and Eastern Europe where borrowing in foreign currency is or was common.Economic consequences of NPLsthere is strong empirical evidence suggesting that high levels of non-performing loans affect new lending. using Spanish data, Jiménez et al. (2012a) conclude that a higher proportion of doubtful loans3 on banks’ balance sheets significantly and sizably lowers the probability of a bank’s approval of loan applications from businesses, even when controlling for other factors such as the size or capitalisation of the bank (see Figure 3.4).Data from the united States corroborates this picture; if average npls increase, firms that are able to finance themselves through the bond market will be more likely to do so and will rely less heavily on bank credit as a result (becker and ivashina, 2011, see Figure 3.5). Although they mainly focus on larger firms that are able to substitute bank finance with market financing, their results strongly suggests that small firms without access to the bond market are more likely to be credit-constrained when the average level of npl in the banking sector rises.4Although empirical studies on the impact of SME non-performing loans on SME lending are rare, it is reasonable to assume that credit to SMEs suffers disproportionally. An increase in the relative proportion of non-performing loans on the balance sheets incentivises banks to a flight to quality. As banks experience more non-performing loans from lending to SMEs5, and SME lending is generally considered to be more risky than lending to large businesses, this flight for quality clearly favours large enterprises. indeed, empirical research illustrates that less-capitalised banks with weak assets cut down their lending activities to small firms more than to the business sector in general (Albertazzi and Marchetti, 2010). banks will most likely cut back lending to segments within the SME sector that are deemed especially risky, such as micro-enterprises or start-ups.79FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCEFigure 3.4. The impact of a one standard deviation increase in the average proportion of doubtful loans on the probability of loan applications granted, spain 2002-1035302520151050Proportion of doubtful loans Probability of a loan application grantedAverage proportion of doubtful loans2.71%4.94%30%27.70%Source: Jiménez et al. (2012a).12 http://dx.doi.org/10.1787/888933193592Figure 3.5. The impact of a one standard deviation increase in the average NPL rate on the probability of receiving a bank loan, United states, 1990-20101614121086420NPL rate Probability of receiving a bank loanAverage NPL rate1.90%4.94%14%10.10%Increase of one standard deviationSource: becker and ivashina (2011).12 http://dx.doi.org/10.1787/888933193609Moreover, banks often extend further credit to existing borrowers with a high probability of default in order to avoid or postpone credit losses in the short term when faced with a deterioration of the quality of their balance sheet, a practice known as evergreening. Smaller banks, where the discretion on lending decisions is usually higher and who rely less on automatic procedures are especially prone to evergreening (Albertazzi and Marchetti, 2010). this does only often deteriorate banks’ balance sheets further in the long run, but also locks up resources in unproductive sectors and companies, thereby impairing an efficient allocation of scarce funds and dragging economic growth.recent circ*mstantial evidence suggests that the relationship between business lending and npls also hold true in the aftermath of the 2007 financial crisis: financial institutions with impaired balance sheets, weak capital positions and a large amount of 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE80 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015dubious claims cut back on lending more than financial institutions. the three largest banksparticipating in the united Kingdom Funding for lending Scheme (lloyds, royal bank of Scotland and Santander), for example, all had major capital shortfalls and all cut back on lending to SMEs. this is in contrast to most of the other participating financial institutions whose balance sheets were sounder and where credit to SMEs expanded (Darvas, 2013).the European banking Authority (EbA) considers that a clean-up of bank balance sheets is a prerequisite for new lending and hence economic growth (EbA, 2014). this is particularly relevant for countries with high rates of npls where, partly as a consequence, lending to SMEs declined the most. the iMF also attributes tight lending standards and challenging conditions for new business lending in the Euro area to a combination of weak bank profits and a decline in the overall quality of bank assets. they estimate that non-performing loans have approximately doubled between 2009 and 2014 in the Euro area, mostly due to evolutions in “stressed countries” and expect that credit growth will remain weak as long as the legacy debt burden is not addressed (Kerry et al., 2014).however, it should be noted that aggregate ratios such as the npl rate are a limited tool to assess the asset quality and overall health of the financial sector, and other tools may be a useful complement. For example, the npl rate may disguise problems in one particular bank, bank group, or segment of the market. Moreover, the risks npls pose for financial stability also depend on the capitalisation of the banking sector; well-capitalised banks are more able to set aside sufficient provisions to cover potential losses. npl ratios are thus only one of the indicators to be considered for assessing the overall quality and riskiness of banks’ asset sheets; others may include assessing the riskiness of the sector of activity of the borrower or the credit history of the borrower.nevertheless, rising non-performing loans are indicative of a deterioration of asset quality in general.6 it is widely recognised that banking crises are usually preceded by a deterioration of the asset quality of banks and a sharp increase of the level of npls and loan defaults. given the link between loan growth and npls on the one hand, and the relationship between the prevalence of npls and the heath of the banking system on the other, the bank for international Settlements (biS) has identified the credit-to-gDp ratio as one of the best performing early warning indicators to predict banking crises. More precisely, the so-called credit-to-gDp gap, i.e. the difference between the credit-to-gDp ratio and its long-term trend, is used as a guide for setting up counter-cyclical capital buffers by basel 3 (Drehmann and Juselius, 2013).in addition, financial crises are usually protracted events that exert a sizeable negative impact on output, employment and government finances for several years. using a very extensive database of financial crises, reinhart and rogoff (2009) estimate that, on average, unemployment rises by seven percentage points over the down phase of the cycle, gDp declines by 9% and government debt expands by 86% following a bank crisis. there is also,strong evidence that banking crises have a deeper impact on developed countries, possibly reflecting deeper banking systems in these economies and hence greater scope for disruption (laeven and Valencia, 2012).the sharp uptick of npls currently observed in some countries therefore runs the risk of hampering economic growth and even of a renewed financial crisis, this time triggered by weakening of the asset quality in recent years. As weak banks become less willing to lend, a vicious cycle of further weakened banks and contracting credit supply might undermine any potential economic recovery for the period to come. the weak economic performance 81FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCEof Japan starting from the early 90s, can be attributed to the high level of non-performing loans and overall poor quality of the balance sheets of many of its banks, among other factors, and holds lessons for other countries which have witnessed a deterioration of bank assets (see box 3.3).box 3.3. Japan’s banking crisisin the late 1980s, early 1990s, Japan experienced a rapid expansion of credits, in part due to inadequate supervision and regulation in risky property-related businesses such as real estate, construction and non-bank financial services. this fuelled an asset-price bubble which, when it burst, burdened banks’ balance sheets with high historical levels of non-performing loans and a severely weakened and undercapitalised banking sector (see Figure 3.6).Figure 3.6. Outstanding NPLs and losses on disposals on NPLs (in billions of yen)160 000140 000120 000100 00080 00060 00040 00020 0000-20 000450 000400 000350 000300 000250 000200 000150 000100 00050 00001992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Others Direct write-off Provisions NPL outstandingSource: Fujii and Kawai (2010).12 http://dx.doi.org/10.1787/888933193612As using public funds to address banks’ balance sheet problems proved very unpopular with the general public, the government was hesitant to take decisive actions until 2002. this was in part due to methodological problems in the measurement of npls. because official data was largely based of banks’ own assessments, official npl figures in 2000 and 2001 were consistently underestimated by an estimated level of 25 to 37% and necessary provisions and write-offs by 30 to 50% (Fujii and Kawai, 2010).the misallocation of lending, the rapid increase of non-performing loans on banks’ balance sheets, and the inability to deal decisively and timely with this deterioration of banks’ asset quality are considered to be at the center of the Japanese banking crisis in the early 1990s, and the ensuing “lost decades” of negative growth in absolute terms. the cumulated output loss of the banking crisis is estimated to stand at 45% of gDp between 1997 and 2001 (laeven and Valencia, 2012).the Japanese experience underlines the need to take decisive actions to clean out banks’ balance sheets when npls increase to an unsustainable level. Financial institutions otherwise have the incentive to ‘evergreen loans;’ that is extending further credits to troubled firms, enabling them to repay due interest payments and avoiding (or usually postponing) a bankruptcy, which might trigger a need for a recapitalisation of the bank. by keeping insolvent firms afloat, balance sheets are further weakened in the long term. Empirical research indeed shows that Japanese banks increased lending to their most troubled borrowers during the 1990s, who usually performed badly after receiving additional funding. banks with reported capital ratios close to the required minimum had the highest incentives to evergreen and, consequently, were especially prone to misallocate loans in that manner (peek and rosengren, 2003). 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE82 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Non-performing loans: the case of Chilein order to monitor the stability of the banking system, the Chilean Central bank reports an npl ratio (or Indicador de Cartera Vencida) in its Financial Stability report (FSr). the npl ratio7 measures the share of the loan portfolio with payment delays for more than 90 days according to the conditions set forth by the international Monetary Fund (iMF).8 the definition includes the total amount of loans that have defaulted on their payments. For loans contracted in installment payments that include acceleration clauses, the full amount a loan can only be considered on default 90 days after a judicial action has been lodged. it is worth mentioning that up to December 2008, there were difficulties in comparing the npl ratio of the Chilean banking system with respect other economies. At the time, the npl ratio was calculated based only on the share of a loan amount whose payment was behind for at least 90 days and so the remaining part of the loan amount was classified as not having defaulted.While banks were prone to continue lending to troubled borrowers, the continued weak state of Japanese bank balance sheets had a pronounced impact on corporate lending, further illustrating the strong link between npls and business lending. between 1997 and 2005, corporate lending shrank by almost a quarter in nominal terms. by March 2005, npl rates for major Japanese banks dropped to a low of 2.9%. partly as a consequence, 2005 also marked the first year when the decline of corporate lending was reversed (see Figure 3.7).Figure 3.7. Corporate lending in Japan (in 100 million yen), 1995-20071995-031995-091996-031996-091997-031997-091998-031998-091999-031999-092000-032000-092001-032001-092002-032002-092003-032003-092004-032004-092005-032005-092006-032006-092007-032007-093 800 0004 000 0004 200 0004 400 0004 600 0004 800 0005 000 0005 200 0005 400 000Source: bank of Japan (2014).12 http://dx.doi.org/10.1787/888933193627Finally, the Japanese experience also highlights the importance of accurate measurement of npl levels and the need for a thorough assessment of the quality of bank balance sheets. unreliable data proved to be very detrimental to the overall trust in the banking sector, and led to the postponement of policy measures to restore financial health. in 2001, a renewed inspection of bank loans by the FSA (Financial Services Agency) resulted to the reclassification of a quarter of all “normal” or “need attention” loans examined to “bankrupt” or “in danger of bankruptcy” (Fujii and Kawai, 2010).Source: bank of Japan (2014); Fujii and Kawai (2010); laeven and Valencia (2012); peek and rosengren (2003).box 3.3. Japan’s banking crisis (cont.)83FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCEFigure 3.8. Non-performing loan index for all commercial loans in Chile, 2009-141.401.351.301.251.201.151.101.051.000.950.90Jan.-09Apr.-09Jul.-09Oct.-09Jan.-10Apr.-10Jul.-10Oct.-10Jan.-11Apr.-11Jul.-11Oct.-11Jan.-12Apr.-12Jul.-12Oct.-12Jan.-13Apr.-13Jul.-13Oct.-13Jan.-14Apr.-14Ju,l.-140.97%1.37%1.00%1.19%Source: Central bank of Chile (2014a).12 http://dx.doi.org/10.1787/888933193632the Commercial Debt npl ratio provided by the Chilean Central bank for businesses of all sizes, with available data as of January 2009, shows that the npl ratio for the overall portfolio started at 0.97% in 2009, increased afterward reaching a high level of 1.37% in mid-2010 then decreased and has slowly edged up since 2011. however, since January 2014 this indicator has registered an upward trend consistent with a strong slowdown in the economic activity of the Chilean economy. Despite the increase, the FSr of the Chilean Central bank explains that the npl ratio level has been stable since the last report. however, it also shows that when the service sector is excluded of the analysis the Aggregate paid installment ratio increases (see graph ii: Default ratios on Commercial loans).As for SMEs9 npls, the June 2014 edition of the FSr the Chilean Central bank shows that delays in commercial loan payments for debt of an amount ranging from Clp 500 to Clp 18,000 have increased in the last two years. it also indicates that during 2013 there was an increase in default rates across sectors, excluding services sector, reaching the highest level in five years. the FSr explains that there has not been a significant increase in commercial debt default due to the stability of payment behavior in the service sector that accounts for a large share of the commercial loan portfolio.the FSr also indicates a rise of npls in sectors that are most exposed to the overall business cycle and the construction sector (in contrast to the service sector). Moreover, npls increased more for SME loans than for business loans in general.recently, the Chilean Committee of Financial Stability, comprised of the main regulators and the Ministry of Finance, in its July 2014 meeting10 addressed npl data in the commercial portfolio in the construction and real estate development industry. With regard to the construction and real Estate Development sector, the data explain a lower exposure of the banking system to these sectors, reaching 6.4% of the total commercial portfolio. the construction sector indicator npl ratio has increased since the middle of the year 2012. the FSr points out that it is not observed that the banking system is applying lax lending approval standards and no risk for the overall financial stability is perceived.the SME npl ratio, reported by the Superintendency of banks and Financial institutions (SbiF), is included in Financing SMEs and Entrepreneurs. this indicator is calculated as the share of a loan whose payment is behind for one day or more over the total amount of the commercial debt portfolio. the methodology reported for SMEs does not accelerate 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE84 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015nor extrapolate the share of a loan that has defaulted to the total amount of the loan. hence, this methodology is not necessarily consistent with the npl provided in the report of Financial Stability elaborated by the Central bank. the information makes a distinction between the parts of the amount of a loan that are overdue for less than 30days, between 30 to 90 days, and more than 90 days. in Chile, the ratio of non-performing loans dropped between 2009 (7.1%) and 2012 (6.1%). 2013 saw an uptick of the ratio of npls, however, as economic growth dipped (Figure 3.9 and table 3.3).table 3.3. A break-up of NPLs in Chile 2009 2010 2011 2012 2013Up to 30 days 0,60% 0,50% 0,50% 0,50% 0,50%Between 30 and 90 days 0,60% 0,40% 0,40% 0,40% 0,40%More than 90 days 5,90% 5,70% 5,20% 5,00% 5,80%Total non-performing loans for SMEs 7,10% 6,60% 6,10% 6,00% 6,70%Source: SbiF12 http://dx.doi.org/10.1787/888933194586Figure 3.9. Break-up of NPLs in Chile, 2009-1412.0010.008.006.004.002.0001.401.201.000.800.600.400.2001.201.000.800.600.400.20012.0010.008.006.004.002.000Micro Small MediumTotal NPL ratesJan. 09May 09Sep. 09Jan. 10May 10Sep. 10Jan. 11May 11Sep. 11Jan. 12May 12Sep. 12Jan. 13May 13Sep. 13Jan. 14May 14Up to 30 daysJan. 09May 09Sep. 09Jan. 10May 10Sep. 10Jan. 11May 11Sep. 11Jan. 12May 12Sep. 12Jan. 13May 13Sep. 13Jan. 14May 1430-90 daysJan. 09May 09Sep. 09Jan. 10May 10Sep. 10Jan. 11May 11Sep. 11Jan. 12May 12Sep. 12Jan. 13May 13Sep. 13Jan. 14May 14More than 90 daysJan. 09May 09Sep. 09Jan. 10May 10Sep. 10Jan. 11May 11Sep. 11Jan. 12May 12Sep. 12Jan. 13May 13Sep. 13Jan. 14May 14Source: SbiF12 http://dx.doi.org/10.1787/88893319364585FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCENon-performing loans: the case of spainnon-performing loans have risen in many countries since the financial crisis erupted. Within OECD countries, the increase in npls has been particularly dramatic for Southern European countries and in particular in Spain, where npls have risen from low levels by international comparison in 2007, to one of the highest levels in the OECD by 2013. Data on npls in Spain are published on a monthly basis by the bank of Spain (i.e. general npl data) and additional breakdowns are published quarterly, providing data on npls divided into nine economic sectors. the general evolution of npls in Spain mirrored its economic growth: until the beginning of the financial crisis, when Spain’s economy was expanding, a very low and descending npl ratio (npl/Overall Credit) was observed. As growth rates turned negative in 2008 and 2009, the proportion of non-performing loans quickly spiralled.the graph shows that until 2008, the npl ratio remained very stable and low at a level under 1% of all business loans (the average of 2005, 2006 and 2007 was 0.8%). it was after the financial uncertainty that began in the summer of 2007 (and the growth in the interest rates of that year) when this ratio began to pick up. At the beginning of 2008, the npl ratio started to grow and reached a level of 5% during 2009. the growth was slower in 2010 but remained positive and accelerated in 2011 and 2012. in 2012, the decision to transfer the real state assets coming from the nationalised banks to a “bad bank” (the SArEb), caused a slight fall in the ratio, but after that decrease, which was technical in nature, the npl ratio continued to grow until the last months of 2013. it was during the last months of 2013 and the first half of 2014 that a relative stabilisation and even a very modest decline of the ratio could be observed (slightly above 13%). 2014 witnessed a decline in the npl ration for two consecutive months, which had not been seen since 2006.Figure 3.10. Non-performing loans (% of credits) in spain, all credit institutions1510502006 2007 2008 2009 2010 2011 2012 2013 201413.15Source: bank of Spain.12 http://dx.doi.org/10.1787/888933193650Data,by sector show npl ratios increased markedly in all sectors of the economy, but the levels vary substantially. not surprisingly, sectors related to real estate activity show a significantly higher npl ratio, while npl ratios are smaller than average in services and industry. So, the overall npl ratio to productive activities remains around 20% (npl ratios for credit to consumers are slightly lower and are excluded in this graph), and is in line with the behaviour of the productive credit to services firms. loans to real estate companies and to construction firms have the biggest npl ratios; around 35% of all credits are non-performing. On the other hand, the industrial sector performs better than average, with a npl ratio around 13% at the beginning of 2014. 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE86 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Figure 3.11. NPL ratio by sector in spain40353025201510502006 2007 2008 2009 2010 2011 2013 20142012Real EstateConstructionServicesIndustryOverall credit in productive activitiesSource: bank of Spain.12 http://dx.doi.org/10.1787/888933193668the ratio of npls to all loans also varies considerably across Spanish banks and across firms of different size. loans to SMEs are more likely to be non-performing than loans to large enterprises. Whereas npls for large companies average just below 10%, this proportion rises to over 30% for the worst affected. A similar dispersion between the best performing bank and the worst performing can be observed for npls of SMEs.FEDEA, a Spanish think tank publishes periodically a forecast of the npl ratio for the next months in its Observatory of the npls. they foresee a stabilisation of the npl ratio around its current level for the third quarter of 2014 as a consequence of the Spanish economic recovery, and a progressive and slow way down of this npl ratio beginning in the last months of 2014. the national bank of Spain expects persistently high npl ratio’s in the next few years as npls lag economic growth, which has been only recovering very recently.11 the ratio of npls will therefore most likely remain significantly higher in the next years than in the pre-crisis period or even at the height of the financial crisis in the early 1990s (when npls in Spain reached a peak of 9%).Several measures have been taken to mitigate the risks such a high level of npls pose for the financial stability. provisional requirements for the banking sector have been stepped up, resulting in a coverage ratio (i.e. provisions reserved to npls) that has outpaced the rise of npls in 2013. A report from the international Monetary Fund indicates that the coverage ratio stood at 44% at the end of September 2013, up from 38% a year earlier and very close to the threshold of 45% that the regulator requires (iMF, 2014).As a consequence as the European rescue plan for banks, backed by the iMF, the financial sector is being recapitalised, increasing the asset-to-equity ratio from 5.8% in 2010 to 7.9% in the first quarter of 2014 and the lending to deposits ratio from 173.7% in 2007 to 125.4% in the first quarter of 2014. According to the bank of Spain, the early signs of a recovery of lending operations to non-financial firms can be attributed in part to the improved health of the financial sector.in addition, the disclosure requirements of financial institutions have been strengthened: they are now required to provide detailed information on restructured and refinanced loans, npls, asset quality across different parts of their loan portfolio, the 87FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCEconcentration by sector of their portfolio and so on, in order to detect potential problems related with a deteriorating of asset quality at an earlier stage.Conclusionsthe Scoreboard data show that SME npls increased almost invariably in the years following the economic crisis of 2007. npls peaked for a majority of Scoreboard countries in 2010, the stabilised, and were often close to or below pre-crisis levels in 2013. however, npls continued to rise in italy, greece, portugal, Serbia and Spain after 2010, to levels high both by historical and international standards. this was mainly due to high credit growth in the pre-crisis period, persistent weak economic performance in the aftermath of the 2007 recession and, in the case of Serbia, the exchange rate evolution.high and rising npls are indicative of a deterioration of overall asset quality and hold economic risks, as an overview of the literature suggests. One risk is the potential impact on business lending, as banks become less inclined to lend when burdened by a high proportion of doubtful assets. the Scoreboard data indeed suggest that there is a clear and negative relationship between the evolution of SME npls and SME lending. Credit conditions also tend to be the tightest in countries where SME npls have increased over the last few years. this in turn imperils the economic recovery and, in the worst case scenario, could trigger a renewed financial crisis.When available, the SME npl ratio is a useful instrument to evaluate the creditworthiness of the SME sector. Moreover and although not perfect, it serves as a proxy to assess the overall quality of banks’ SME loan portfolio, which has clear implications for SME loan growth. however, as evidence from this chapter has shown, even when data for SME npls are available, definitions vary markedly across countries and over time, making comparisons within and between countries extremely difficult.there is a clear need to focus attention on harmonisation of npl data, given the importance of this indicator for SME lending, and for economic growth more broadly. A necessary first step in addressing a deteriorating in banks’ balance sheets is a reliable assessment of the problem, which relies on a correct measurement of npls. this would enable a better understanding of the role npls play in SME access to finance and greater comparability and analysis of the Scoreboard data. it would therefore be useful to adopt a single definition of nplS and to collect data on the npl ratio for both SMEs and the overall business loan portfolio, or alternatively the npl ratio for large firms. the Scoreboard will continue to monitor developments in this area and work towards data harmonisation of npls.Notes1. loan growth tends to be strong during economic contractions while npls tend to increase in downturns.2. See, for example, Drees and pazarbasioglu (2006) on the banking crisis in the early 1990s in the nordics or Dell’Arricia et al. (2012) on the subprime mortgage market crisis in the united States that triggered the worldwide financial crisis in 2007.3. Doubtful loans are usually considered to be a subset of all npls and both terms are conceptually very close.4. note that the above studies disentangle demand and supply effects; lending is thus not only down because the demand for business credit declines when more enterprises struggle to repay their loans, but also because banks become less inclined to lend to businesses under these circ*mstances given all other things equal. 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE88 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 20155. See beck et al. (2008), for an analysis of npl rates for 91 banks in 45 countries.6. See, for example, Cihak and Schaeck (2007) for information on the usefulness of non-performing loans as an indicator for the overall asset quality of banks.7. Sagner (2011) proposes that,the non-performing loans (npl) ratio, defined as the change in the stock of npl adjusted by write-offs and standardized by loans, as the main measure to be used for modelling the credit risk of the Chilean banking system with certain statistical and conceptual advantages of the npl ratio with respect to loan loss provisions (llp or gasto en provisiones). Sagner also points out, based on an econometrical model, that the only variables with statistical significance that helps to explain increases in the commercial npl ratio are the quarterly variation of the Chilean peso- uS Dollar Exchange rate and economic growth. http://www.bcentral.cl/eng/studies/working-papers/618.htm8. the iMF classifies a credit obligation as a non-performing loan when the following conditions are met: “A loan is nonperforming when payments of interest and/or principal are past due by 90 days or more, or interest payments equal to 90 days or more have been capitalized, refinanced, or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons—such as a debtor filing for bankruptcy—to doubt that payments will be made in full. After a loan is classified as nonperforming, it (and, possibly, replacement loan(s)) should remain classified as such until written off or payments of interest and/or principal are received” http://www.imf.org/external/pubs/ft/bop/2005/05-29.pdf9. the Commercial loan portfolio of SbiF is classified into size categories ((a) Micro borrowers: debt of up to uF 500 u.F.; (b) Small borrowers: debt ranging from uF 500 and up to uF 4000; (c) Medium-sized borrowers: debt from uF 4000 and up to uF 18.000.; (d) large borrowers: debt of an amount larger tan uF 18000 and of up to uF 200,000; y (e) Mega borrowers: debt larger than uF 200 000.and excludes credit operations that fall in some of the following categories: (a) npl whose payments are behind for more than 90 days and no effort is shown in order to collect the debt; y (b) when more than six years have elapsed since the date the total payment was due. therefore, SME loans are those of an amount not greater than uF 18000.10. http://www.hacienda.cl/consejo-de-estabilidad-financiera/actas-de-sesiones/celebrada-el-30-de-julio-de-2014.html11. http://www.bde.es/f/webbde/Secciones/Publicaciones/InformesBoletinesRevistas/InformesEstabilidad Financera/14/IEF-Ing-Mayo2014.pdfReferencesAlbertazzi, u. and Marchetti, D. (2010), Credit supply, flight to quality and evergreening: an analysis of bank-firm relationships after lehman, banca d’italia Working paper no756, April 2010. https://www.bancaditalia.it/pubblicazioni/econo/temidi/td10/td756_10/td_756_10/en_tema_756.pdfbank of italy (2013), Financial Stability report, no 5, April 2013 https://www.bancaditalia.it/pubblicazioni/stabilita-finanziaria/rapporto-stabilita-finanziaria/2013/rsf_2013_5/en_stabfin_5_2013/Financial-Stability-Report-5.pdfbank of Japan (2014), bOJ time Series Data Search. http://www.stat-search.boj.or.jp/index_en.htmlbeck, t., Demirguc-Kunt, A. and Martinez peria, M. (2008), bank financing to SMEs around the world: Drivers, obstacles, business models and practices, the World bank policy research Working paper series 01/2008. http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2008/11/24/000158349_20081124111459/Rendered/PDF/WPS4785.pdfbeck, r., Jakubik, p. and piloiu A (2013), non-performing loans: What matters in addition to the economic cycle?, ECb Working paper, no 1515. http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1515.pdfbecker, b. and ivashina, (2011) V, Cyclicality of credit supply: firm level evidence, harvard business School Working paper, 10-107. http://www.hbs.edu/faculty/Publication%20Files/10-107_0f5189aa-791c-43f5-b0a2-93650990fa90.pdfbarisitz, S. (2013), non-performing loans in Western Europe – A selective comparison of countries and definitions, Focus on European Economic integration. http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Focus-on-European-Economic-Integration/2013/Focus-on-European-Economic-Integration-Q1-13/chapters/feei_2013_q1_studies_barisitz_tcm16-253775.pdfCentral bank of Chile (2014), Financial Stability report, first half 2014. http://www.bcentral.cl/eng/publications/policies/pdf/fsr1_2014.pdf89FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCECihak, M. and Schaeck, K. (2007), how well do aggregate bank ratios identify banking problems, iMF Working paper 2007-275. http://www.imf.org/external/pubs/ft/wp/2007/wp07275.pdfChilean Central bank (2014), Financial Stability report June 2014 http://www.bcentral.cl/eng/publications/policies/pdf/fsr1_2014.pdfDarvas, Z. (2013), bank system soundness is the key to more SME financing, bruegel policy Contribution, issue 2013/10. http://www.europarl.europa.eu/document/activities/cont/201307/20130712ATT69731/20130712ATT69731EN.pdfDe bock, r. and Demyanets, A. (2012), bank asset quality in emerging markets: Determinants and spillovers, iMF Working paper 12/71. https://www.imf.org/external/pubs/ft/wp/2012/wp1271.pdfDell’Ariccia, g., igan, D. and laeven, l. (2012), Credit booms and lending standards: Evidence from the subprime mortgage markets, Journal of Money, Credit and banking, Volume 44, issue 2-3. http://onlinelibrary.wiley.com/doi/10.1111/j.1538-4616.2011.00491.x/abstractDrees, b. and pazarbaciog lu, C. (1995), the nordic banking Crises: pitfalls in Financial liberalization? (June 1995). iMF Working paper. http://ssrn.com/abstract=883209Drehmann, M. and Juselius M. (2013), Evaluation early warning signals of banking crises: Satisfying policy requirements, biS Working paper no 421. http://www.bis.org/publ/work421.pdfEbA (2014), EbA final draft implementing technical standards. https://www.eba.europa.eu/documents/10180/449824/EBA-ITS-2013-03+Final+draft+ITS+on+Forbearance+and+Non-performing+ exposures.pdfECb (2014), Comprehensive assessment stress test manual, https://www.ecb.europa.eu/pub/pdf/other/castmanual201408en.pdf?39be7cde5292024e934c55ce02390ce8Fujii, M. and Kawai, M. (2010), lessons from Japan’s banking crisis, 1991-2005, Asian Development bank institute Working paper series, no 222, June 2010. http://www.adbi.org/files/2010.06.29.wp222.lessons.japan.banking.crisis.1991.2005.pdfgutierrez girault, M. and hwang, J. (2010), public credit registers as a tool for bank regulation and supervision, World bank policy Working paper 5489. http://elibrary.worldbank.org/doi/pdf/ 10.1596/1813-9450-5489hempel h. and Sorensen C., (2010), the impact of supply constraints on bank lending in the euro area crisis induced crunching, ECb Working paper Series, no 2162, november 2010. http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1262.pdfiMF (2005), the treatment of non-performing loans, Eighteened Meeting of the iMF Committee on balance of payment Statistics, Washington, D.C., June 27-July 1, 2005 http://www.imf.org/external/pubs/ft/bop/2005/05-29.pdfiMF (2014), iMF country report no 14/283, italy. http://www.imf.org/external/pubs/ft/scr/2014/cr14283.pdfJimenez, g. Ongena, S., peydró, J. and Saurina, S. (2012a), Credit supply versus demand: bank and firm balance sheet channels in good and crisis times, European banking Center Discussion paper no 2012-003. http://www.ecb.europa.eu/events/pdf/conferences/rolecred/Jimenez_Ongena_Peydro_Saurina_2011-12-29.pdf?47375b5d4636a05d9dd1cae586e43c31Jiménez, g., Ongena, S., peydró, J. and Saurina, S. (2012b), Credit supply and monetary policy: identifying the bank-balance sheet channel with loan applications, American Economic review volume 102, no 5, August 2012 http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.102.5.2301Kerry, W., portier, J, ruggerone, l. and Verkoren, C., (2014),,What a drag: the burden of nonperforming loans on credit in the euro area, the international Monetary Fund’s global Economy Forum, http://blog-imfdirect.imf.org/2014/06/23/what-a-drag-the-burden-of-nonperforming-loans-on-credit-in-the-euro-area/laeven, l. and Valencia, F., (2012), Systemic banking crises database: An update, international Monetary Fund Working paper no 12/163. http://www.imf.org/external/pubs/ft/wp/2012/wp12163.pdflouzis, D., Vouldis, A. and Metaxas, V. (2012), Macroeconomic and bank-specific determinants of non-performing loans in greece: A comparative study of mortgage, business and consumer loan portfolios, Journal of banking & Finance, Vol. 36, issue 4, April 2012. http://www.sciencedirect.com/science/article/pii/S0378426611002895OECD/Eclac (2012), latin American Economic Outlook 2013: SME policies for Structural Change, OECD publishing. DOi: 10.1787/leo-2013-en 3. nOn-pErFOrMing lOAnS: inSightS FrOMthESCOrEbOArD On SME FinAnCE90 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015peek, J. and rosengren E., (2003), unnatural selection: perverse incentives and the misallocation of credit in Japan, nbEr Working paper no 9643. http://www.nber.org/papers/w9643.pdfreinhart, C. and rogoff, (2009), the aftermath of financial crises, American Economic review, Volume 99 (2). http://www.nber.org/papers/w14656Sagner, A. (2011), El Índice Cartera Vencida como Medida de riesgo de Crédito: Análisis y Aplicación al Caso de Chile http://www.bcentral.cl/eng/studies/working-papers/618.htmVucovic, V. and Domazet, i., (2013), non-performing loans and systemic risk: Comparative analysis of Serbia and countries in transition CESEE, industrija, Vol. 41 issue 4. http://aseestant.ceon.rs/index.php/industrija/article/view/42791Financing SMEs and Entrepreneurs 2015 An OECD Scoreboard © OECD 2015Chapter 4Country profiles of SME and entrepreneurship financing 2007-13These chapters present data for debt and equity financing in 34 countries: Austria, Belgium, Canada, Chile, the People’s Republic of China, Colombia, the Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Ireland, Israel, Italy, Japan, Korea, Mexico, the Netherlands, New Zealand, Norway, Portugal, the Russian Federation, Serbia, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Thailand, Turkey, the United Kingdom and the United States. It is structured around individual country profiles, which analyse the core indicators which monitor SME access to finance, and their definitions which are specific for each country. The statistical information is complemented by a description of government policies which respond to the current financing constraints facing SMEs.FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 201592 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriAAustriaSMEs in the national economyin 2010, 99.7% of all firms were SMEs and they employed approximately 67% of the labour force.table 4.1. Distribution of firms in Austria, 2010By firm size, as a percentageFirm size (employees) Number %All firms 301 726 100.0SME (0-249) 300 726 99.7Micro (1-9) 263 804 87.4Small (10-49) 32 081 10.6Medium (50-249) 4 841 1.6Large (250 +) 1 000 0.3Note: Data excludes financial and insurance enterprises. non-employer enterprises are included.Source: OECD (2013).12 http://dx.doi.org/10.1787/888933194590SME lendingData on SME loans are approximated by new business loans up to Eur 1 million euros (excluding loans granted to sole proprietors) and are provided by the Austrian national Bank for the period 2009-13. Data for previous years and data on the stock of outstanding loans are not available. the 2013 data show a decline of 5% of new loans to SMEs. this indicator has been in decline since 2009, a very small increase in 2011 being the sole exception. new loans to all enterprises decreased even more sharply, i.e. by 9.2% from 2012 to 2013. the share of new SME loans to all loans has therefore increased to 12.1%. the share of short-term loans (maturity up to 6 month) has been decreasing since 2009 from almost 60% to 51.1% in 2013. the decrease in loans to the corporate sector is to a great extent due to demand side factors. gDp growth totaled to a mere 0.3% and gross fixed capital formation declined by 1.4% in 2013, resulting in a lower demand for credit. Moreover, economic uncertainties still prevail and the deleveraging needs of the corporate sector further restrict demand for credit. On the supply side, the decrease in new loans may be, in part, also explained by developments in the banking sector. in 2013, it has reinforced its capital ratio and reported a negative consolidated return on assets.As indicated by the growth rates of outstanding business loans to non-financial corporations, lending to business started deteriorating in the first half of 2008. Figure 4.1 reveals that the drop in growth rates of business loans was more pronounced in the 93FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriAEuro area than in Austria. growth rates turned negative in 2009 in both Austria and the Euro area. however, in contrast to the Euro area, Austria has sustained positive growth rates since the Q3 2010.Figure 4.1. Growth rates of business loans to non-financial corporations in Austria, 2004-1476543210Interest rate on the main refinancing operations, ECBLoans up to EUR 1 million in Austria Loans over EUR 1 million in AustriaOct. 03May 04Dec. 04July 05Feb. 06Sep. 06Apr. 07Nov. 07June 08Jan. 09Aug. 09Mar. 10Oct. 10May 11Dec. 11July 12Feb. 13Sep. 13Apr. 14Note: Annual change in stocks adjusted by exchange rate effects, write-offs and reclassificationSource: Austrian national Bank.12 http://dx.doi.org/10.1787/888933193675According to the data collected by the Austrian institute for SME research, the equity base of SMEs has continued to increase in recent years. in the business year 2006-07, the share of equity in the composition of total capital of SMEs amounted to 23.8% and the share of bank liabilities totaled to 33.2%. in the business year 2012-13, the share of equity increased to 28.4%, whereas the share of bank liabilities totaled to 30.2%. Moreover, as indicated in Figure 4.2, large firms are less dependent on loans provided by the banking sector than SMEs.Figure 4.2. Financial structure of SMEs and large firms in Austria, 2006-07 vs. 2012-1310090807060504030201002006/07 2012/13 2006/07 2012/1323.8 28.433.230.211.9 10.323.6 23.734.8 34.613.9 12.49.7 8.530.9 32.24.7 4.6Other liabilitiesDeferred credits to incomeTrade payablesAdvances receivedBank liabilities EquitySocial capitalLarge firms SMEsSource: Austrian institute for SME research.12 http://dx.doi.org/10.1787/888933193684 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriA94 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Credit conditionsAs a result of the ECB´s reduction in official lending rates in 2008, lower interest rates were passed on to the corporate sector, both for SMEs and for large firms. Average SME interest rates were at a historical low in 2013 and more than halved since 2007 from a level of 5.11% to 2.28% in 2013, the lowest level since 2007. Although the interest rate spread increased to 0.51%,in 2013, this is still low compared to most other OECD countries. interest rates for new loans to non-financial corporations up to Eur 1 million with an initial rate fixation up to 1 year (including variable interest rates) stood at 2.23% in 2013, compared to 2.40% in 2012. interest rates for new loans up to Eur 1 million with an initial rate fixation over 5 years amounted to 3.39% in 2013, down from 3.61% in 2012. the most recent reductions in the ECB’s lending rates have not translated into lower interest rates for the corporate sector. this might be due to an increase in the EuriBOr, causing banks to partly pass on the burden of higher refinancing costs to its customers.Figure 4.3. Interest rates for new business loans to non-financial corporations in Austria compared to the ECB interest rate for the main refinancing operations, 2003-14Monthly data, as a percentage76543210Interest rate on the main refinancing operations, ECBLoans up to EUR 1 million in Austria Loans over EUR 1 million in AustriaOct. 03May 04Dec. 04July 05Feb. 06Sep. 06Apr. 07Nov. 07June 08Jan. 09Aug. 09Mar. 10Oct. 10May 11Dec. 11July 12Feb. 13Sep. 13Apr. 14Source: Austrian national Bank.12 http://dx.doi.org/10.1787/888933193694the turmoil in the financial markets following the bursting of the housing bubble caused a tightening of the lending criteria applied by the Austrian banks in 2008. results from the quarterly Euro area Bank lending Survey (BlS) indicate a tightening of the conditions applied by Austrian banks for approving SME loans (determined by the bank´s margin on loans, non-interest rate charges, collateral requirements, maturity, loan covenants and size of loans or credit lines) from 2008 on. Between the first quarter of 2010 and the second quarter of 2011, credit conditions for SMEs stagnated and afterwards deteriorated again. the latest survey results highlighted a slight improvement in lending conditions in Q22014.95FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriABlS results for credit standards (costs of funds and balance sheet constraints, pressure from competition and the perception of risk) have been following a similar path. the progressive stiffening of lending standards relates to factors regarding refinancing costs and balance sheet restrictions such as equity capital costs and liquidity positions (in part due to Basel iii), as well as a worsening in the perception of risk regarding the general economic outlook and the industry or firm specific expectations.in line with this trend, results from the European Central Bank/European Commission Survey on the access to finance of SMEs in the Euro area (SAFE) reveal that SMEs perceived a tightening of lending conditions in 2009. the survey from October 2013-March 2014 indicates an increase in the cost of bank loans. Collateral requirements remain restrictive, although SMEs report a slight improvement in this respect. the same holds true for the availability of bank lending. According to the Business Survey conducted by the Austrian institute of Economic research (WiFO) of 1 250 enterprises (mostly SMEs), approximately 25% of all surveyed firms show a demand for credit in the last quarter. the share of firms with a demand for credit that did not get a bank loan increased from 20% (5% of all surveyed firms) in August 2013 to 27% (6% of all surveyed firms) in August 2014. this development is mainly driven by the increasing share of firms that deemed terms and conditions unacceptable, as depicted in Figure 4.4.Figure 4.4. Access to bank lending of Austrian EnterprisesShare of all firms with demand for credit in%1009080706050403020100% Amount and conditions worse than expected Amount and conditions as expectedNo realistic chance Rejected by the bank Unacceptable conditionsNov. 11Feb. 12Aug. 12 Nov. 12 Nov. 13 Feb.13May 13Aug. 13 Feb.14May 14Aug. 14May 12Source: WiFO Konjunkturtest12 http://dx.doi.org/10.1787/888933193702Equity financingAs in many countries, venture and growth capital investments in Austria are very volatile. One major investment can make a big difference in the data. this volatility is clearly visible in table 4.2, where total venture and growth capital slumped in 2012 to less than Eur 70 million after a peak of Eur 206 million in 2011. At Eur 90.3 million in 2013, this figure recently increased again, mainly due to a pick-up in later stage venture capital. 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriA96 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015table 4.2. Venture and growth capital investments in Austria, 2007-13By stage of investment, in Eur millionStage 2007 2008 2009 2010 2011 2012 2013Seed 7.6 5.1 6.4 6.0 14.4 9.2 11.2Start-up 28.6 26.5 43.7 14.2 39.0 28.1 25.8Later stage venture 43.7 19.2 25.8 23.4 40.4 5.3 28.1Total venture 79.9 50.8 75.9 43.6 93.8 42.5 65.1Growth 25.2 32.3 43.3 29.0 112.0 25.8 25.2Source: EVCA; pErEp Analytics12 http://dx.doi.org/10.1787/888933194603Other indicatorsthe European payment index shows that the average number of payment delays increased for business to business from 12 days in 2012 to 13 days in 2013, the highest figure since keeping track of the data in 2007. the average number of payment delays for business to consumer remained unchanged at 9 days. in March 2013, the Austrian parliament introduced the late payment act, implementing the Eu Directive on Combating late payment in Commercial transactions. the act aims to improve the payment behaviour by introducing new due dates and increased interest rates.Bankruptcies in Austria stood at 5,459 in 2013, reaching the lowest level in the period 2007-13. Compared with 2012, the indicator decreased by 9.6% or 582 firms. this development is even more pronounced when compared with the 2009 figure (6 902 firms went bankrupt). in terms of bankruptcies per 1,000 firms, the indicator declined to 12 compared with 18 in 2009. this illustrates the strength of the Austrian economy, which is recovering more quickly than most other countries within the Euro zone.Government policy responseFinancial support for businesses is provided by several institutions. this section focuses on institutions providing loan guarantees and/or direct lending to SMEs. the Austria Wirtschaftsservice gmbh (aws) serves as the federal small and medium business promotional bank and offers Austrian enterprises financial support in the form of loans, guarantees, grants and equity as well as consulting services. the Forschungsförderungsgesellschaft GmbH (FFG) is the national funding institution for applied research and development and provides grants, loans, guarantees and consulting services. the Oesterreichische Hotel- und Tourismusbank (ÖHT) is owned by private banks and is specialised in financing and promoting investments in the field of tourism by means of loans, guarantees and grants which are supported by the government. the Oesterreichische Kontrollbank AG (OeKB) is the main provider of financial and information services to the export industry.As a result of government interventions in response to the crisis, support measures for SMEs´ access to finance were created or strengthened in Austria. the most important measure in,this regard was adopted in October 2008: the “economic stimulus package i” in the total amount of Eur 1 billion. it included far-ranging support measures for the Austrian economy and in particular for SMEs.Direct lendingthe Erp Fund1 (European recovery programme Fund) was established in 1962 and provides soft loans (erp loans) with reduced interest rates via commercial banks to new and existing businesses in the areas of technology assistance, implementation of research 97FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriAand technological development initiatives, and establishment of pilot and demonstration facilities. it is organised as a separate legal entity and was organisationally integrated into the aws in 2002. the Öht serves as the trust bank of the Erp Fund in the tourism sector. in the framework of the economic stimulus package i the credit lines for erp loans were increased in 2009 and 2010 by Eur 200 million to a total of Eur 600 million and have been maintained on a higher level. Moreover, the Erp Fund introduced the erp micro-credit programme in 2008. the maximum loan amount of Eur 30 000 per micro-credit was increased in 2010 to a total of Eur 100 000 and interest rates for erp loans were lowered from 1.75% to 1.5%, which currently stands at 1.0%. in response, SME loans provided by the Erp Fund increased by 43.5% from 2008 to 2011 to a total of Eur 399 million. in 2013, erp-loans to SMEs amounted to Eur 387 million.Moreover, the Federal Ministry of labour, Social Affairs and Consumer protection introduced the “Microcredit” programme in 2010 in cooperation with aws and private financial institutions, aiming to encourage self-employment through provision of micro loans. the loan amount is limited to Eur 12 500 for sole proprietors and Eur 25 000 for partnerships. in October 2012, the EiF signed a co-operation agreement with the Erste Bank (a private bank) under the Eu microfinance programme in order to increase the micro lending activity to start ups. From the beginning of 2010 to 30th of June 2014 loans in the amount of Eur3.41million were provided.Besides erp loans, Öht also grants so called “top-A loans” to SMEs seeking capital for investments in the tourism and leisure sector. in 2013, the Oht granted top-A loans in the total volume of Eur 116.2 million. in the course of 2014, new guidelines for the Öht programmes were established. For investments between Eur 100000 and Eur 700000 the government offers a grant of up to 5% and a government guarantee. For investments between Eur 700 000 and Eur 1 million, loans at low interest rates will be granted, which can be combined with a government guarantee. the respective state government (regional level) has the possibility to subsidise the interest rate on the loan. For investments between Eur 1 million and Eur 8.3 million, the government subsidises the interest rate of the loan with 2%. the FFg as well as several institutions at the regional level also engage in direct lending to SMEs. taken together, new direct loans granted to SMEs increased by roughly 8% from 2007 to 2008 to Eur 579 million. Following a further increase after 2009 direct loans granted to SMEs returned to their 2007 level in 2012 and increased in 2013 to Eur 594 million.Loan guaranteesAws guarantees up to 80% of the total loan amount. the guarantees are funded by the state budget complemented by a counter-guarantee of the Eu Cip programme and can be combined with erp-loans. the aws funds are channelled through existing aws guarantee products designed for SME loans, the promotion of SME innovation, micro credits and investments in Austria. in response to the crisis the government increased the guarantee capacity by Eur 400 million over the period 2009-10. reaching Eur 184 million in 2009, guarantees provided by the aws dropped to Eur 131 million in 2013. Due to a change in the guidelines starting in July 2014, SME loan guarantees provided by aws have a stronger focus on young innovative entrepreneurs. Within this new framework a number of measures have been implemented for the period 2014-16: ● turning failure into success - the principle of 2nd chance: failed entrepreneurs shall not be excluded from subsidies and gain support for restructuring and re-launch. 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriA98 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 ● Shift from grants to guarantee programmes as well as the combination with Eu financial instruments increases the attractiveness of aws loan guarantees (e.g. reduced guarantee fees). ● reduced administrative burden due to a harmonisation between existing aws guidelines.in December 2013, aws signed a rSi loan counter-guarantee agreement under the Eu CiF programme with the EiF for two years. One basic element of this agreement is that the aws has to ensure additionally, which means that all benefits resulting from this agreement have to be transferred to the respective company. under the terms of this agreement, the aws will be able to provide guarantees to business start-ups and SMEsranging from Eur 30000 to Eur 2.5 million. the guarantee fees will be reduced by 0.6percentage points on average. the Eu financial instruments are therefore an important tool for Austria to facilitate access to finance for SMEs.loan guarantees granted by Oht are counter-guaranteed by the government. the guarantees cover loans from commercial banks and can be combined with erp-loans and tOp-A loans granted by Oht. Within the framework of the crisis measures, the guarantee capacity was doubled from Eur 250million to Eur 500 million and the maximum individual guarantee amount was increased from Eur2million to Eur 4 million. SME loan guarantees more than tripled to over Eur 26 million from 2007 to 2009. in 2013, loan guarantees provided by Öht amounted to Eur 34.2 million. As illustrated in table 4.3, loan guarantees are also provided to a lesser extent by the FFg.table 4.3. Government Loan Guarantees in Austria, 2007-13Eur million, flowsInstitution 2007 2008 2009 2010 2011 2012 2013aws 330.0 149.0 184.0 152.0 127.0 139.0 131OHT 7.5 13.9 26.4 20.4 14.1 18.3 34.2FFG 3.4 0.7 3.5 0.6 1.5 0.5 2.1Total 340.9 163.6 213.9 173.0 142.6 157.8 167,3Source: Administrative data from aws, Oht, FFg12 http://dx.doi.org/10.1787/888933194618Export financingÖsterreichischer Exportfonds GmbH, which is owned by the OeKB (70%), provides exportfinancing via commercial banks to SMEs. this financing covers up to 30% of the export turnover and is guaranteed by means of an aval (i.e., a guarantee instrument) by the Austrian Federal Ministry of Finance against adequate premia. the premia is included in the interest rate of the Exportfonds. in 2012, the Federal Ministry of Finance increased the underlying guarantee facility by Eur 200 million to a total of Eur 1.2 billion. At the end of 2013, a total volume of Eur 1.027 million was made available to 1,762 SMEs.table 4.4. Financing for exporting SMEs by Oesterreichische Exportfonds GmbHEur million, stocks 2007 2008 2009 2010 2011 2012 2013Financing for exporting SMEs in EUR million 863 834 804 793 824 1 039 1 027Number of SMEs 1 782 1 669 1 599 1 569 1 541 1 771 1 762Source: Federal Ministry of Finance.12 http://dx.doi.org/10.1787/88893319462599FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriARisk capitalin order to stimulate the development of a well-functioning market for risk capital, the government has created innovative,incentives since 2009. in the long run, existing “financial gaps” in traditional debt financing instruments (e.g. loans) should be removed and the actual “market failure” should be reduced. the basic concept of the initiatives is to guarantee a complete separation from regular state aid programmes. they are therefore carried out by subsidiaries of the aws. table 4.5 lists the major initiatives of the government.As illustrated in table 4.5, the “Jungunternehmer-Offensive” started in January 2013 in order to facilitate access to alternative financial instruments for SMEs. two complementary funds (“aws gründerfonds” and “aws Business Angel Funds”) provide equity financing (e.g. venture capital) to start-ups and young, growth-oriented SMEs.Moreover, the national threshold for the obligation to publish a prospectus when securities and certain other investment products are offered to the public has been raised in July 2013 from Eur 100 000 to Eur 250 000 (calculated over a period of 12 months). this step aims at facilitating access to additional sources of alternative financing (e.g. crowdfunding). Further, the obligation to publish a prospectus when shares in a cooperative are offered to the public has been raised to Eur 750,000 (calculated over a period of 12 months).in addition to the above mentioned regulatory improvements, the Austrian government launched via the federal promotional bank aws two new initiatives to facilitate access to capital markets for SME. the “aws Equity Finder” was established in August 2014 and is designed as a contact platform which enables both start-ups and SMEs to gain simple access to risk capital, business angels, crowdfunding or other alternative forms of financing. to ease the external costs of publishing a capital market prospectus the aws supports SMEs with additional subsidies up to 50% (or: Eur 50,000). this will reduce the barrier to raise funds via capital markets above the regulatory threshold and is therefore targeted especially on SMEs.table 4.5. Risk capital initiatives, AustriaEur millionInstrument start Target group aws shareaws Mittelstandsfonds 01-09-2009 companies in the growth stage EUR 80 000 000 Venture Capital Initiative1. Tranche 17-12-2010companies in the seed/start-up or initial growth stageEUR 6 250 000 2. Tranche 29-03-2012 EUR 4 800 000 3. Tranche 20-12-2012 EUR 2 900 000 4. Tranche 25-06-2013 26-03-2014EUR 8 600 000 5. Tranche call EUR 7 000 000 Cleantech Initiative 01-01-2011companies in the seed/start-up or growth stage with special focus on cleantech sector (energy and environment) EUR 5 780 000 Jungunternehmer-Offensiveaws Business Angel Fonds02-01-2013young entrepreneurs (via selected Business Angels)Federal government: EUR 15 000 000 EIF: EUR 7 500 000aws Gründerfondscompanies in the seed/start-up or initial growth stageFederal government: EUR 65 000 000 Erste Bank: EUR 3 500 000Source: Austria Wirtschaftsservice gmbh12 http://dx.doi.org/10.1787/888933194634 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriA100 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Other measuresin March 2009, the government enacted a tax reform, reducing wage and income tax in order to boost consumption. Before 2010, individuals calculating their taxable income by cash basis accounting could claim a tax allowance of 10% of their annual profit capped with Eur 100 000 per individual and year. this benefit required the acquisition or production of depreciable tangible fixed assets or qualified securities. As from 2010, the tax allowance was extended to all kinds of business income (irrespective of the accounting method) and increased from 10% to 13%. Additionally, the tax allowance was modified in so far as the first Eur 30,000 of profit do not need to be invested in order to qualify for a tax deduction. in return, the tax relief for retained earnings, which applied to individuals under the regime of balance sheet accounting, was abolished. For the fiscal periods from 2013 to 2016, the allowance is reduced to 7% for the bracket of annual profits between Eur 175 000 and Eur350000 and to 4.5% for the bracket of annual profits between Eur 350000 and Eur580000. there is no allowance for annual profits exceeding Eur 580 000. Since March 2014 the above mentioned temporary reduction of the allowance is no longer limited to the fiscal periods 2013 to 2016, but became temporarily unlimited. Furthermore, since March 2014 the required acquisition of qualified securities is restricted to some qualified mortgage bonds for the fiscal periods from 2014 to 2016. During this period, the acquisition of qualified securities (except the mortgage bonds mentioned) will no longer qualify for the benefit.Box 4.1. Definition of Austrian SMEsin Austria, SMEs are classified according to the Eu definition (2003/361/EC): Firms with less than 250employees and annual turnover below Eur 50 million and/or balance sheet total below Eur 43 million.the national Bank of Austria does not classify data on business lending by firm size. SME loans and interest rates are approximated by loans up to Eur 1 million.table 4.6. Scoreboard for Austria, 2007-13Indicators Units 2007 2008 2009 2010 2011 2012 2013Debt New business loans, SMEs (flows) EUR million .. .. 10 054 9 414 9 476 9 347 8 884New business loans, total (flows) EUR million .. .. 85 490 74 896 73 041 80 867 73 460SME loan share % of total business loans .. .. 11.76 12.57 12.97 11.56 12.09New long -term loans, SMEs (flow) EUR million 4 040 4 275 4 532 4 446 4 348New short-term loans, SMEs (flow) EUR million .. .. 6 014 5 139 4 944 4 901 4 536Government loan guarantees, SMEs EUR million 341 164 214 173 143 158 167Government guaranteed loans, SMEs EUR million 429 211 279 226 185 207 211Government direct loans, SMEs EUR million 535 579 574 607 633 539 594Interest rate, SMEs % 5.11 5.47 2.89 2.43 2.92 2.46 2.28Interest rate, large firms % 4.69 5.04 2.33 1.96 2.55 1.98 1.77Interest rate spread % 0.42 0.43 0.56 0.47 0.37 0.48 0.51Equity Venture and growth capital (seed, early and later stage) EUR million 79.9 50.8 75.9 43.6 93.8 42.5 65.1Venture and growth capital (growth capital) EUR million 25.2 32.2 43.2 29 112 25.8 25.2Other Payment delays, B2B days 8 8 11 12 11 12 13Payment delays, B2C days 20 16 6 11 11 9 9Bankruptcies, total number 6 295 6 315 6 902 6 376 5 869 6 041 5 459Bankruptcies, per 1 000 firms Number 18 17 18 16 14 14 12Source: table 4.7.12 http://dx.doi.org/10.1787/888933194649101FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriAFigure 4.5. Trends in SME and entrepreneurship finance in Austria10 054 9 414 9 476 9 34785 49074 896 73 04180 8678 88473 460 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 0002009 2010 2011 2013201201 0002 0003 0004 0005 0006 0007 0002009 2010 2011 201320126 0145 1394 944 4 9014 0404 2754 532 4 446 4 53601234562007 2008 2009 2010 2011 2012 20134805005205405605806006206406602007 2008 2009 2010 2011 2012 20130.42 0.43 0.56 0.47 0.37 0.48 0.515.115.472.892.432.922.462.28535579 5746076335395940501001502002502007 2008 2009 2010 2011 2013201202.04.06.08.010.012.014.016.018.020.05 2005 700,6 2006 7007 2002007 2008 2009 2010 2011 2012 2013105.183.1119.272.6205.868.390.36 295 6 3156 9026 3765 8696 0415 45918.0 17.0 18.0 16.0 14.0 14.0 Business loans, SMEs Business loans, total Short-term loans, SMEs Long-term loans, SMEsInterest rate spread Interest rate, SMEs Government direct loans, SMEsVenture and growth capitalAnnual, in EUR million Annual, in EUR millionAnnual, as a percentage Annual, in EUR millionAnnual, in EUR million Annual, number of bankruptcies and bankruptcies per 1 000 firmsA. SME loans1 and total business loans, 2009-13 B. Long- and short term loans to SMEs1, 2009-13C. Interest rates for SMEs1 and interest rate spread, 2007-13 D. Government direct loans to SMEs, 2007-13E. Venture and growth capital invested, 2007-13 F. Bankruptcies, 2007-13Bankruptcies, totalBankruptcies, total per 1 000 firms1. loans up to Eur 1 million.Source: Chart A, B, C: Austrian national Bank, Chart D: administrative data from various institutions. Chart E: European Venture Capital Association (EVCA). Chart F: Kreditschutzverband 187012 http://dx.doi.org/10.1787/888933193715 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: AuStriA102 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Notes1. it is a government-run service organization which is funded by grants given to Austria under the Marshall plan by the united States of America.2. loans up to Eur 1 million.ReferenceOECD (2013), Entrepreneurship at a Glance 2013, OECD publishing, DOi: http://dx.doi.org/10.1787/entrepreneur_aag-2013-entable 4.7. Definitions and sources of indicators for Austria´s ScoreboardIndicator Definition SourceDebt Business loans, SMEs New business loans to non-financial corporations granted by a sample of 103 Banks (excluding loans to sole proprietors), loan size up to EUR 1 millionAustrian National BankBusiness loans, total New business loans to non-financial corporations granted by a sample of 103 Banks (excluding loans to sole proprietors)Austrian National BankLong-term loans, SME New business loans to non-financial corporations granted by a sample of 103 Banks (excluding loans to sole proprietors), loan size up to EUR 1 million and original maturity over 6 months Austrian National BankShort-term loans, SMEs New business loans to non-financial corporations granted by a sample of 103 Banks (excluding loans to sole proprietors), loan size up to EUR 1 million and original maturity up to 6 months Austrian National BankGovernment loan guarantees, SMEs Loan guarantees granted to SMEs (defined as firms with less than 250 employees) proxied by loan guarantees from aws, ÖHT and FFG, excluding regional data, and including guarantees for erp-loans and TOP-A loans; flowsAdministrative data from Austria Wirtschaftsservice GmbH, Österreichische Hotel- und Tourismusbank; Forschungsförderungsgesellschaft GmbHGovernment guaranteed loans, SMEs New loans to SMEs (defined as firms with less than 250 employees) covered by guarantees from aws, ÖHT, FFG, including erp-loans and TOP-A loans, excluding export loans, flows Administrative data from Austria Wirtschaftsservice GmbH, Österreichische Hotel- und Tourismusbank GmbH; Forschungsförderungsgesellschaft GmbHGovernment direct loans, SMEs New loans to SMEs (defined as firms with less than 250 employees) provided by the ERP-Fund, ÖHT, FFG as well as regional institutions, flowsAdministrative data from Austria Wirtschaftsservice GmbH, Österreichische Hotel- und Tourismusbank; Forschungsförderungsgesellschaft GmbH, four regional institutions and one body belonging to the public sector Rejected SME loans Rejected loan applications and loan offers whose conditions were deemed unacceptable, as% of loan applications by SMEs (employees with less than 250 employees). Partial loan rejections are not included.European Commission;SBA FactsheetInterest rate, SMEs Interest rate for new business loans to non-financial corporations (excluding loans to sole proprietors, including renegotiated loans), loan size up to EUR 1 millionAustrian National BankInterest rate, large firms Interest rate for new business loans to non-financial corporations (excluding loans to sole proprietors, including renegotiated loans), loan size over EUR 1 millionAustrian National BankInterest rate spread Difference between interest rates for new business loans to non-financial corporations (excluding loans to sole proprietors, including renegotiated loans); loan size up to EUR 1 million and over EUR 1 millionAustrian National BankEquity Venture and growth capital Venture and growth capital invested in Austrian firms, including seed, start-up, later-stage venture and growth capital (market statistics), all firmsEuropean Venture Capital AssociationOther Payment delays business to business Average number of days for business to business, all firms Intrum Justitia; European Payment IndexPayment delays business to consumer Average number of days for business to consumer, all firms Intrum Justitia; European Payment IndexBankruptcies, total Number of enterprises bankrupt; total and per 1 000 enterprises, all firms (including all sections of ONACE 2008)Kreditschutzverband 1870FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 103 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuMBelgiumSMEs in the national economyin 2010, SMEs in Belgium constituted 99.8% of total firms, the majority of which were micro-enterprises (94.0%). Only 0.2% are large enterprises.table 5.1. Distribution of firms in Belgium, 2010Firm size (employees) No. of firms %Micro (0-9) 506 138 93.8Small (10-49) 27 317 5.1Medium (50-199) 4 222 0.8Large (>200) 867 0.2All firms 539 411 100.0Note: Data excludes financial and insurance enterprises. non-employer enterprises are included.Source: OECD (2013a).12 http://dx.doi.org/10.1787/888933194656SME lendingthe national Bank of Belgium defines a small enterprise as one with an annual average headcount of less than 50 employees and a turnover of less than Eur 7.3 million. in 2012, the national Bank has changed its methodology regarding data collection and analysis. Before 2012, credits lower than Eur 25 000 were not included in the nBB database. On top of that, the reporting of banks has improved and is now more complete. the data illustrate that, except for a small decrease in the business loans to SMEs in 2009, business loans to SMEs continually increased between 2007 and 2012. Over this period, the loan growth averaged at 9% each year, which is higher than in most countries in the Eurozone. in 2013, the outstanding stock of SME loans decreased slightly by 0.5% however.Since 2008, business loans to SMEs generally increased at a faster pace than business loans to all firms. the business loans to SMEs as a share of all business loans has therefore increased from 59.6% in 2008 to 67.2% in 2013. Between 2007 and 2013, SMEs make relatively more use of long term loans and less of short term loans. the share of short term loans to SMEs has declined from 38.5% in 2007 to 28.4 in 2013. After an increase to 80.7% in 2009, the share of SME loans used to SME loans authorised has decreased again to 77.5% in 2012. At 77.6 in 2013, the degree of utilisation of available credits, has remained roughly constant over the 2012-13 period. 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuM104 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015SME loan growth during Belgium’s weak economic recovery might be explained in part by the fact that,banks were refocusing on the domestic market as the default rate on domestic loans was relatively low (OECD, 2014b). they were also given incentives to engage in SME lending by various government programmes which are described in the section on policy responses.Credit conditionsSME loans are proxied by loans of less than Eur 1 million. the interest rate charged to SMEs has lowered from a peak of 5.7 in 2008 to 2.06 in 2013. the interest rate on these loans are consistently higher than for loans of more than Eur 1 million, a proxy for loans to large enterprises, but the gap has narrowed to just 30 base points in 2013 up from 58 in 2012 and 92 in 2009, which is below the level seen in most other OECD countries and suggests that Belgian SMEs and larger Belgian firms benefitted equally from the drop of the lending rates of the European Central Bank.According to the SAFE survey from the ECB, the percentage of SMEs that applied for a loan, but were rejected or refused because the costs were too high, were back at 2011 levels (10%) in 2013 after spiking to 18% in 2012. the quarterly Bank lending survey illustrates the dramatic tightening of credit standards for Belgian SMEs during the crisis years of 2008 and 2009 and the loosening of conditions since the first quarter of 2013 up to the first quarter of 2014. this recent loosening contrasts with the evolution of the Eurozone average where credit standards have more or less remained constant over the last year (see Figure 5.1).Figure 5.1. Change in credit standards for SMEs in Belgium and the Euro zone, 2007-143020100-10-20-30-40-50-6001-03-200701-06-200701-09-200701-12-200701-03-200801-06-200801-09-200801-12-200801-03-200901-06-200901-09-200901-12-200901-03-201001-06-201001-09-201001-12-201001-03-201101-06-201101-09-201101-12-201101-03-201201-06-201201-09-201201-12-201201-03-201301-06-201301-09-201301-12-201301-03-2014Change in credit standards Belgian SMEs Change in credit standards Eurozone SMEsSource: national Bank of Belgium.12 http://dx.doi.org/10.1787/888933193723Mid 2014, a survey was held for the Belgian Federal SME Observatory with respect to the demand for financing by SMEs during the previous 12 months. Most of the respondents (around 900) were from SMEs aged 5 years or older (further called “mature SMEs”). Microenterprises were defined as having 1-9 employees with a yearly turnover of less than Eur 2 million, small enterprises having 10-49 employees and less than Eur 10 million turnover and medium sized enterprises having 50-249 employees with a turnover of 105FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuMEur 10-50 million. A smaller part of the survey was held among around 100 SMEs less than 5 years old (further called “start-ups”). Although the limited number of responses affects the reliability of the results, some interesting comparisons with the mature SMEs could be made nonetheless.As table 5.2 shows, in 2014 a bit less than one quarter of SMEs older than 4 years were requesting bank finance for operational uses. About 40% of them requested a bank loan for investment purposes. For the starters, the proportion stood at 52% and 35% respectively, underlying their dependence on bank finance for operational uses.table 5.2. Demand for bank finance during previous 12 months in Belgium, percentage of SMEs 2012 2014Operational uses SMEs > 4 yrs 27 23.4 SMEs =< 4yrs 52.3Investments purposes SMEs > 4 yrs 44.4 39.7 SMEs =< 4yrs 34.6Source: Belgian Federal public Service of Economy, SMEs, Self-employed and Energy - SME Observatory12 http://dx.doi.org/10.1787/888933194664Mature micro-enterprises experienced a much higher rejection rate than the larger ones. On average, SMEs’ rejection rate remained at a similar level in 2014 as in 2009 (around 17%), and a much higher rejection rate than in 2008 (9%). Microenterprises experienced a serious increase between 2010 (20%) and 2014 (27%). For larger SMEs, the rejection rates since 2009 stabilised to some extent (see Figure 5.2). Start-ups face much higher rejection rates, amounting to 66.6% in 2014 (not depicted in Figure 5.2).Figure 5.2. Rejection rates broken down by the size of enterprises in Belgium, 2008-14302520151050% 2008 2009 2010 2011 2012 2014All firms SMEs Micro-enterprises8.8%6.0%17.0%17.3%14.6%26.2%14.8%13.9%19.6%12.9%10.7%21.1%16.1%12.9%22.7%16.6%13.2%26.8%Source: Belgian Federal public Service of Economy, SMEs, Self-employed and Energy - SME Observatory12 http://dx.doi.org/10.1787/888933193738SMEs were also asked to give different reasons why they experienced problems, if any, when applying for bank financing in the previous 12 months. the request for guarantees, the lack of transparency concerning the criteria for bank lending, the high price for short and long term loans and the request for more information by the bank were considered as problematic by the respondents (see table 5.3). 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuM106 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 201580% of mature SMEs that did not request bank finance expressed no need for loans; for start-ups just over half gave this reason. Start-ups indicated much more frequently than mature SMEs that they had tried non-bank financing (21% against 7%) or did not apply for bank loans because they were discouraged (19% against 5%).table 5.4 summarises.table 5.4. Reasons why some firms did not request bank finance in the previous 12 months in Belgium Start-ups (N=43) Mature SMEs (N=270)I had no need for credits 53.5% 80.1%I have postponed the investment 11.6% 10.0%Reliance on alternative financing * 20.9% 7.0%Credit would still not be obtained * 18.6% 4.8%Other 4.7% 3.7%Note: * Significant difference between start-ups and mature SMEsSource: Belgian Federal public Service of Economy, SMEs, Self-employed and Energy - SME Observatory12 http://dx.doi.org/10.1787/888933194687For SMEs that requested and obtained bank finance, start-ups often rely more heavily on bank overdrafts (40% of them used overdrafts versus 19% for mature SMEs) and less on credit for investments (40% versus 59% for mature SMEs).Mature SMEs used non-bank financing sources less frequently compared with start-ups (54% against 34%). Finance from associates of the company and from friends and family were particularly popular for mature SMEs (respectively 47% and 19% versus 13% and 5% for start-ups). the amount of internal financing from retained profits appeared to be much less prevalent for start-ups than for mature SMEs (9% against 22%).Asset-based financing and equity financingBoth leasing and factoring are important sources of finance for Belgian businesses. in 2008, the new production of leasing stood at close to 10% (9.73%) of all fixed capital investments, for a total amount of Eur 4405.9 million. this amount fell by 22.65% in 2009 and recovered somewhat afterwards. in 2013, total production of leasing declined again by 7.38%, which means that 8.43% of all gross fixed capital investments were financed by leasing.,Although this is the lowest figure since 2007, the amounts involved remain substantial.table 5.3. Problems encountered when applying for a bank loan in Belgium, percentage of SMEsNo problems at allNot many problemsSome problems Many problemsThe bank demanded real guarantees (N = 45) 13.3 20.0 13.3 53.3The bank demanded personal guarantees (N = 53) 7.5 15.0 9.4 67.9The bank demanded more information (N = 45) 11.1 20.0 22.2 46.6The bank took a long decision period (N = 46) 15.2 23.9 26.1 34.7A high cost price for a short or long-term credit (N = 41) 12.2 19.5 17.1 51.2A decrease in profitability (N = 29) 27.6 44.8 13.8 13.7A decrease in the repayment capacity (N = 31) 29.0 38.8 9.7 22.6The opacity of the criteria (N = 42) used 16.7 14.2 14.3 54.8The proposed business plan convinced insufficiently (N = 39) 30.8 41.0 23.9 15.4Lack of knowledge regarding alternative financing (N = 40) 30.0 27.5 15.0 27.5Risk capital proposed to strict conditions (N = 23) 21.7 26.1 8.7 43.4Loss of control by capital contributions from third parties (N = 16) 37.5 18.8 12.5 31.3Source: Belgian Federal public Service of Economy, SMEs, Self-employed and Energy - SME Observatory12 http://dx.doi.org/10.1787/888933194676107FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuMFactoring turnover, in contrast, grew very strongly since 2007, and has more than doubled between 2007 and 2013. in 2013, the total turnover of the factoring industry in Belgium totalled Eur 47,684 million. this is 12.46% of gDp, which is up from the 2012 level (at 11.27%) and marks a dramatic increase from the pre-crisis level of 2007 (at 5.72%).As in most other countries, equity financing displays a lot of volatility. Whereas equity financing totalled Eur 380 million in 2007, it levelled off to Eur 286 million in 2012 and contracted further to Eur 256 million in 2013, the latter mainly due to a large decline in growth capital (see table 5.7).table 5.5. The take-up of non-bank financing instruments in Belgium Start-ups (N=97) Mature SMEs (N=826)None * 34.0% 54.1%Internal financing with retained earnings 9.3% 21.5%Capital contributions from existing partners * 35.1% 6.2%Capital contributions of new partners * 6.2% 0.5%Advances from partners 5.2% 6.7%Loans from friends and family * 18.6% 5.0%Financing through group or holding * 1.0% 6.9%Risk capital * 1.0% 0.1%Subordinated loans * 8.2% 1.5%Business angel * 4.1% 0.2%Supplier Credit 8.2% 5.0%Financial or operational leasing 7.2% 10.2%factoring 0.0% 2.2%crowdfunding 0.0% 0.1%other * 4.1% 1.5%Note: * Significant difference between start-ups and mature SMEsSource: Belgian Federal public Service of Economy, SMEs, Self-employed and Energy - SME Observatory12 http://dx.doi.org/10.1787/888933194694table 5.6. Outstanding stock of leasing (based on the customer portfolio of the Belgian Leasing Association) and factoring turnover, 2007-13Eur million 2007 2008 2009 2010 2011 2012 2013LEASING Non-real estate leasing (financial et operational) 3 917 4 293 3 366 3 591 4 083 4 088 3 683Real estate leasing 489 563 391 415 356 362 438Total production 4 406 4 856 3 756 4 006 4 439 4 450 4 122Year-on-year growth,% 3.07 10.22 -22.65 6.63 10.82 0.25 -7.38Gross fixed capital formation 46 659 49 886 44 743 44 245 48 928 48 751 48 912Relative importance of leasing in capital formation 9 9.73 8.40 9.05 9.07 9.13 8.43Outstanding stock of leasing (at end of the year) 10 368 12 212 11 637 11 958 12 214 12 656 12 784FACTORING Factoring turnover (domestic and international) 19 200 22 500 23 921 32 200 36 871 42 352 47 684Year-on-year growth,% 17.19 6.32 34.61 14.51 14.87 12.59GDP 335 815 346 375 340 669 355 791 369 258 375 852 382 692Factoring as a proportion of GDP 5.72 6.50 7.02 9.05 9.99 11.27 12.46Source: Belgian leasing Association, EuF Factoring & Commercial Finance12 http://dx.doi.org/10.1787/888933194707 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuM108 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015table 5.7. Venture and growth capital in Belgium, 2007-13Eur thousandStage 2007 2008 2009 2010 2011 2012 2013Seed 8 021 10 166 5 889 4 833 450 2 126 500Start-up 73 953 53 202 90 983 62 801 74 510 64 883 60 613Later 98 871 53 763 59 012 15 280 16 153 27 232 28 385Growth 199 279 223 474 290 415 202 229 130 396 192 054 166 329Total 380 123 340 604 446 298 285 143 221 509 286 295 255 827Source: European Venture Capital Association (2014).12 http://dx.doi.org/10.1787/888933194710Other indicatorsintrum Justitia provides data on payment delays from firms active in business to business, business to consumer and business to government. in 2013, all these delays decreased, from 19 to 18 days in the business to business segment, from 16 to 14 in the business to consumer segment and from 28 to 24 in the business to government segment. the evolution of bankruptcies paints a more sobering picture and increased with 11% in 2013, which is a similar increase as in 2009 and 2010. the number of bankruptcies has increased from a total of 7 713 in 2007 to 12 306 six years later.Government policy responsethe governments responded with programmes at both the federal and the regional levels. Direct loans were available at both levels while loan guarantees were available only at the regional level.table 5.8. Direct loans, government guarantees and guaranteed loans in Belgium, 2007-13EurLevel 2007 2008 2009 2010 2011 2012 2013FederalDir loans,LT 100 432 509 89 075 983 93 114 589 75 019 066 54 087 344 48 489 998 43 663 724Dir loans,ST 0 0 5 430 831 5 005 000 2 644 728 4 095 000 3 794 250RegionsBrussels-CapitalDir loans 22 784 995 12 316 159 17 905 793 12 504 653 12 271 775 8 327 117 6 300 792Guarantees ·· 12 021 086 15 387 771 14 024 864 14 399 592 12 474 473 9 413 111G.loans ·· 17 997 482 23 786 463 20 955 954 21 967 483 26 109 245 17 473 364Leverage ·· 1.50 1.55 1.49 1.53 2.09 1.86WalloniaDir loans ·· 89 537 272 92 516 412 113 151 978 113 409 807 132 288 068 33 808 576Guarantees ·· 44 399 308 68 151 126 52 784 111 68 666 269 66 992 172 68 012 470G.loans ·· 114 901 779 157 182 924 138 385 845 179 661 690 163 235 137 166 037 193Leverage ·· 2.59 2.31 2.62 2.62 2.44 2.44Flemish RegionDir loans 9 249 135 11 859 037 31 777 975 16 211 171 22 608 946 29 928 660 42 842 909Guarantees 77 842 621 100 115 854 328 403 564 487 128 668 234 440 304 186 540 982 402 781 929G. loans 128 156 937 179 774 387 651 733 957 729 034 739 360 108 369 294 994 032 642 558 584TotalDir loans 132 466 639 202 788 451 240 745 600 221 891 868 205 022 600 223 128 843 130 410 251Guarantees 77 842 621 156 536 248 411 942 461 553 937 643 317 506 165 266 007 627 480 207 510G. loans 128 156 937 312 673 648 832 703 344 888 376 538 561 737 542 484 338 414 826 069 140Leverage 1.65 2.00 2.02 1.60 1.77 1.82 1.72Source: Business report of participation Funds, Brussels garanty Fund, groupe Sowalfin, lrM, participatie Maatschappij Vlaanderen.12 http://dx.doi.org/10.1787/888933194725109FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuMAt the regional level direct loans are complemented by loan guarantees. total loan guarantees increased substantially during the crisis and continued to increase during recovery before declining in 2011 and 2012, although they still remained well above pre-crisis levels. 2013 saw a reversal of this trend with marked increase of loan guarantees and guaranteed loans, solely driven,by the government of Flanders. Direct government loans from the federal government more than halved between 2007 and 2013. total direct government loans decreased strongly in 2013, compared to 2012, mainly due to a sharp drop of direct loans from the Walloon government. Direct loans and equity in the Walloon region do not include in 2013 the financings made by the investments companies, which explains the decrease observed.the following policy measures were adopted for the period 2009-13 in the Brussels-Capital region: ● loan guarantees of 80% ● creation of a new product, “express guarantees” that could be confirmed within five working days, with a maximum limit of Eur 250 000 ● intention to increase in the size of the guarantee fund to Eur 80 million if necessary ● coverage of short term loans (2 years) with a maximum limit of Eur 250 000.SMEs can apply directly to the guarantee fund for a loan guarantee. Banks, however, can automatically receive loan guarantees. they do not need to ask permission. After agreeing to give an SME loan, banks merely inform the regional investment fund and the loan guarantee will be granted automatically. the Brussels “Express guarantees” have been sought after and appreciated by the banks because a confirmation can be obtained in five days. 67% of the enterprises applying for guarantees in 2011 were start-ups with less than four years of existence compared to 55% in 2010. Most of these guarantees were for investment which could explain why the SME short-term loan share fell relative to the SME long term loan share.Since 2011 the regional government of Wallonia has strengthened its SME programmes by implementing the European Small Business Act in the Walloon region. Access to finance at each stage of SME’s life cycle is therefore a major priority. the Walloon region, together with the Society of Mutual guarantees of Wallonia, has developed a new financial product which is a mixture of a loan guarantee and a subordinated loan. the loan is guaranteed up to 75% for a maximum of Eur 25 000 with the possibility of a subordinated loan. Over 550 very small enterprises and independent entrepreneurs have used this product.the government of Flanders (Flemish region) supports SME access to finance through direct loans and loan guarantees. Direct loans increased by more than 3.4 times in 2009 compared to 2007. loan guarantees peaked in 2010. it also stimulates venture capital investments through the Flemish investment body. the Flemish government supports the Business Angels network which is a broker between business angels and enterprises needing venture capital. Anyone who grants a loan to a start-up enterprise as a friend, acquaintance or family member receives an annual tax discount of 2.5% of the value of the loan. if the enterprise is unable to repay the loan, the lender gets 30% of the amount owed back via a one-off tax credit in the context of the “win win-lending” scheme.FinMiX provides entrepreneurs with the opportunity to present their project to a panel of financial experts who will advise on the optimal financing mix. Any enterprise can make use of FinMiX as long as venture capital is needed for a financing mix. Entrepreneurs need 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuM110 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015to register and submit a business plan. the government of Flanders has commanded a study on crowd funding. that study has been presented on the 2nd of August 2013”.in addition, in order to ensure adequate SME funding, four large banks have agreed to make Eur 1.1 billion available in 2013. these include Bnp paribas Fortis, KBC, Belfius and ing. priority would be given to long-term credit (5-15 years) available to both SMEs and large enterprises. the banks would assume the risk on part of the funds while another portion would be counter-guaranteed. the banks are discussing with the federal government whether part of the funds could come from the general public or “Volksleningen/ prêts citoyens”.government support for SME venture capital also exists in the Brussels Capital region and the Walloon region. the Brussels regional investment Society and the Walloon regional investment Society use a number of techniques for equity finance such as minority shareholdings with a buyout undertaking, venture loans convertible into shares and subordinated loans. table 5.9. Scoreboard for Belgium, 2007-13Indicators Units 2007 2008 2009 2010 2011 2012 2013Debt Business loans, SMEs EUR million 82 833 89 066 88 925 93 900 100 031 109 646 109 020Business loans, total EUR million 134 211 149 389 141 761 150 610 153 739 167 571 160 871Business loans, SMEs % of total business loans61.72% 59.62% 62.73% 62.35% 65.07% 65.43% 67.77%Short-term loans, SMEs EUR million 37 394 40 355 34 120 35 414 36 476 34 484 33 829Long-term loans, SMEs EUR million 59 676 66 092 72 233 77 194 79 329 82 484 83 893Total short and long-term loans, SMEs EUR million 97 070 106 447 106 353 112 608 115 805 116 968 117 722Short-term loans, SMEs % of total SME loans38.52% 37.91% 32.08% 31.45% 31.50% 29.48% 28.74%Government loan guarantees, SMEs EUR million 77.84 156.54 411.94 553.94 317.51 266.01 480.21Government guaranteed loans, SMEs EUR million 128.16 312.67 832.70 888.38 561.74 484.34 826.07Direct government loans EUR million 132.47 202.79 240.75 221.89 205.02 223.13 130.41SME loans used EUR million 64 440 70 411 71 758 75 187 80 185 84 924 84 627SME loans authorised EUR million 82 833 89 066 88 925 93 900 100 031 109 646 109 020SME loans used % of authorized loans77.80% 79.05% 80.69% 80.07% 80.16% 77.45% 77.63%Interest rate, SMEs 5.45% 5.70% 3.01% 2.51% 2.88% 2.32% 2.06%Interest rate, large firms 4.72% 5.05% 2.09% 1.70% 2.25% 1.74% 1.76%Interest rate spread 0.73% 0.65% 0.92% 0.81% 0.63% 0.58% 0.30%Rejection rate .. .. .. 10% 18% 10%Collateral, SMEs .. .. .. 74.30% 71.90% 78.60% ..Equity Venture and growth capital EUR 380 123 340 604 446 298 285 143 221 509 286 295 255 827Venture and growth capital %, year-on-year growth rate-10.40% 31.03% -36.11% -22.32% 29.25% -10.64%Other Payment delays, B2B number of days .. .. 17 17 15 19 18Payment delays, B2C number of days .. .. 12 12 16 16 14Payment delays, B2G number of days .. .. 31 31 27 28 24Bankruptcies, total number 7 731 8 525 9 511 9 951 10 531 11 083 12 306Bankruptcies, total %, year-on-year growth rate0.51% 10.27% 11.57% 4.63% 5.83% 5.24% 11.03%Bankruptcies, total number 7 680 8 476 9 420 9 570 10 224 10 587 11 740Bankruptcies, total %, year-on-year growth rate0.84% 10.36% 11.14% 1.59% 6.83% 3.55% 10.89%Source: refer to table 5.10.12 http://dx.doi.org/10.1787/888933194738111FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuMFigure 5.3. Trends in SME and entrepreneurship finance in Belgium 0180 0002009 2010 2011 2013201202009200820072007 2008 2010 2011 2013201201234562007 2008 2009 2010 2011 2012 20130500 0002007 2008 2009 2010 2011 2012 2013304050608070902007 2008 2009 2010 2011 20132012014 0002007 2008 2009 2010 2011 2012 2013 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 50 000 100 000 150 000 200 000 250 000 300 000 350 000 400 000 450 000 2 000 4 000 6 000 8 000 10 000 12 00050 000,55 00060 00065 00070 00075 00080 00085 00090 0000.73 0.650.92 0.810.63 0.580.305.455.73.012.512.882.322.06380 123340 604446 298285 143221 509286 295255 82737 39440 35534 120 35 414 36 476 34 484 33 82959 67666 09272 23377 194 79 32982 484 83 89382 83389 066 88 925 93 900100 031109 646 109 020134 211149 389141 761150 610 153 739167 571160 8717 6808 4769 420 9 57010 224 10 58711 74077.8 79.0580.7 80.1 80.277.5 77.664 44070 41171 75875 18780 18584 924 84 627Business loans, SMEs Business loans, total Short-term loans, SMEs Long-term loans, SMEsInterest rate spread Interest rate, SMEs Venture capitalSME loans usedAnnual, in EUR million Annual, in EUR millionAnnual, as a percentage Annual, in EUR millionAnnual, in EUR million Annual, number of enterprisesA. SME loans and total business loans, 2009-13 B. Long- and short term loans to SMEs1, 2009-13C. Interest rates for SMEs and large enterprises, 2007-13 D. Venture capital invested, 2007-13E. Authorised and used SME loans, 2007-13 F. Bankruptcies, 2007-13Bankruptcies, totalSME loans used, % of authorised1. loans up to Eur 1 million.Source: refer to table 5.10.12 http://dx.doi.org/10.1787/888933193746 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: BElgiuM112 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015ReferencesEuropean Venture Capital Association (2014), EVCA yearbook - 2013 European private Equity Activity. http://www.evca.eu/media/165475/yearbook-2014-europe-country-tables-final.xlsxOECD (2013a), Entrepreneurship at a Glance 2013, OECD publishing, paris. DOi: http://dx.doi.org/10.1787/entrepreneur_aag-2013-en.OECD (2013b), OECD Economic Surveys: Belgium 2013, OECD publishing, paris. DOi: http://dx.doi.org/10.1787/eco_surveys-bel-2013-en.table 5.10. Definitions and sources of indicators for Belgium’s scoreboardIndicator Definition SourceDebtBusiness loans, SMEs Authorised credits to SMEs, outstanding amounts, end of December.National Bank of Belgium (NBB): the Central Corporate Credit Register (CCCR)Business loans, total Authorised credits to SMEs and large companies, outstanding amounts, end of DecemberNational Bank of Belgium (NBB): the Central Corporate Credit Register (CCCR)Long-term loans, SMEs Long term credits (more than one year), outstanding amounts, all enterprises, end of DecemberNational Bank of Belgium: the Central Balance Sheet Office (CBSO)SME loans used Used credits by SMEs, outstanding National Bank of Belgium (NBB): the Central Corporate Credit Register (CCCR)SME loans authorised Authorised credits to SMEs National Bank of Belgium (NBB): the Central Corporate Credit Register (CCCR)Interest rate, SMEs Average interest rate on new loans less than EUR 1 million, for less than 1 year (floating rate and up to 1 year initial rate fixation)National Bank of Belgium (NBB): MIR surveyInterest rate, large firms Average interest rate on new loans more than EUR 1 million, for less than 1 year (floating rate and up to 1 year initial rate fixation)National Bank of Belgium (NBB): MIR surveyInterest rate spread Difference between interest rate to SMEs and interest rate to large firms National Bank of Belgium (NBB): MIR surveyCollateral, SMEs Percentage of SMEs that provided collateral related to outstanding creditsCeFiP, annual survey on SME financingEquityVenture capital Investment in venture and growth capital (market statistics, by country of portfolio company). Includes Seed, start-up, later stage venture and growth investment (replacement capital, turnaround and buyout investment were excluded).EVCA, Yearbook 2013OtherPayment delays Average payment delay in days Intrum Justitia, European Payment Index 2013Bankruptcies, total Bankruptcies on annual basis Federal Public Service Economy.FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 113 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADACanadaSMEs in the national economyin 2013, Canadian small businesses (1-99 employees) constituted 98.0% of all businesses and employed over 8.0 million individuals, which translates into 70.2% of the private sector labour force. Among those individuals, 76.0% were employed in the services sector and 24.0% in the goods sector.table 6.1. Distribution of firms in Canada, 2013By firm sizeFirm size (employees) Number of firms % of employer firms1-4 664 770 55.45-9 232 441 19.410-19 148 139 12.320-49 99 685 8.350-99 32 176 2.7100-199 13 830 1.2200-499 6 585 0.5500 + 2 731 0.2Total 1200 357 100.0Note: public and private firms are included and non-employer firms are excluded.Source: Statistics Canada, Business register, December 2013.12 http://dx.doi.org/10.1787/888933194748Small business lendingFigure 6.1 shows the major suppliers of small business financing in 2013. Most small business financing (80.0%) was provided by banks (domestic and foreign) and credit unions and caisses populaires. the remainder came from finance companies, financial funds and insurance companies. this distribution has remained fairly stable since 2012. 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADA114 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Figure 6.1. Debt financing by source of financing in Canada, 2013As a percentageDomestic banks56%Other banks10%Credit unions, caisses populaires10%Finance companies10%Portfolio managers, financial fundsand insurance companies10%Source: Statistics Canada, Survey of Suppliers of Business Financing 2013.12 http://dx.doi.org/10.1787/888933193758Data from the supply-side survey show that debt outstanding to all businesses increased 7.8% in 2013 to CAD 591 billion, while lending to small businesses increased 3.7% to CAD 90.2 billion. Small businesses’ share of total outstanding business loans decreased by 0.6 percentage points to 15.3% in 2013—its lowest level since 2000. Over the 2007-13 period, SME loans and loans to large firms increased by 16.8% and 52.3% respectively. Over the longer 2000-13 period, debt financing to large businesses grew while debt financing to small businesses remained flat (Figure 6.2). SME’s share of total outstanding business loans hence declined continually over the 2000-13 period.Figure 6.2. Business debt outstanding in Canada, 2000-13CAD million (lhS) and percentage (rhS)450 000400 000350 000300 000250 000200 000150 000100 00050 0000302520151050%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Small firms Medium firms Large firms Small business share (RHS)Note: Firm size is proxies by loan authorisation level. Small firms are proxied by loans with an authorisation level below CAD 1 million, medium firms are proxied by loans with an authorisation level between CAD 1 million and less than CAD 5 million; large firms are proxied by loans with an authorisation level greater than CAD 5 million.Source: Statistics Canada, Survey of Suppliers of Business Financing, 2000–2013; and industry Canada.12 http://dx.doi.org/10.1787/888933193763115FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADASupply-side survey results indicate that lending activity for businesses of all sizes increased in the second half of 2013. the increase was significant among large businesses to which lenders disbursed approximately CAD 52 billion in new loans. this represented,a 7.8% increase in disbursals compared with the first half of 2013. Similarly, lending activity increased for small businesses and medium-sized businesses, with loan disbursals rising by about 2.8% and 9.9% respectively. total lending activity in 2013 compared to 2012 increased by 5.6%, 4.5%, and 8.2% for small, medium-sized and large businesses respectively.table 6.2. Value of disbursem*nts in Canada, 2012-13CAD millionBusiness Size Half 1 2012 Half 2 2012 Half 1 2013 Half 2 2013Large (authorisation levels of CAD 5 million or more) 45 994 46 307 48 071 51 803Change% 11.2 0.7 3.8 7.8Medium (authorisation levels between CAD 1 million and CAD 5 million) 13 676 13 646 13 605 14 954Change% 4.7 -0.2 -0.3 9.9Small (authorisation levels below CAD 1 million) 10 709 10 960 11 281 11 594Change% 4.6 2.3 2.9 2.8Total 70 379 70 913 72 957 78 351Change% 8.9 0.8 2.9 7.4Source: Statistics Canada, Survey of Suppliers of Business Financing, 2013; and industry Canada.12 http://dx.doi.org/10.1787/888933194752Small business credit conditionsthe 2013 Credit Conditions Survey results showed that credit conditions remained stable in 2013 after having recovered from the 2009 recession. request rates for debt financing decreased from 25.7% in 2012 to 22.6% in 2013. Also, the 2013 ratio of funds authorised to funds requested was 89.0%, relatively unchanged from 91.0% in 2012.indicators show that small business credit conditions have remained stable since 2011. the average interest rate charged to small businesses increased 0.3 percentage points since 2011, reaching 5.6%. the average business prime rate (the rate charged to the most creditworthy borrowers) stayed flat at 3%. the business risk premium (measured as the difference between the average small business interest rate and the business prime rate) increased from 2.3% in 2011 to 2.6% in 2013. this reflects stable access for financing for small businesses in Canada. the percentage of small businesses asked to pledge collateral to secure their loans returned to 2009 levels (56%), which suggests that lender underwriting standards have loosened. the small business 90-day loan delinquency rate (amount of loan interest and principle payments more than 90 days past due divided by the total loan balance outstanding) is now better than pre-recession levels. Specifically, the 90-day delinquency rate rose from 0.8% in the first quarter of 2007 to 1.1% in the third quarter of 2008, and then as the economy contracted it reached a high of 1.6% in the second quarter of 2009. this declined to 0.6% in the fourth quarter of 2010 as the economy recovered and fell to 0.3% by the end of 2013. 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADA116 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015Figure 6.3. 90-day delinquency rate (%) and GDP in Canada, 2007-131.81.6 1.41.21.00.80.60.40.2096 98 100 102 104 106 108 110 11290 days delinquency rate, (% of outstanding loans)GDP in 2007 CAD, (Q1 2007=100) Q1 2007Q3 2008Q2 2009Q4 2013Q4 2010Sources: paynet inc; Statistics Canada and industry Canada calculation.12 http://dx.doi.org/10.1787/888933193776Equity financingEquity financing (provided in the form of venture capital) increased by 26.5% in 2013 to reach CAD 1.9 billion but remained below the 2007 level. Between 2012 and 2013, seed capital decreased by 1.8% and early stage capital increased by 6.9%. Expansion capital and later and other stages venture capital increased by 17.7% and 41.8%, respectively.table 6.3. Venture and growth capital in Canada, 2007-13in CAD millionStage 2007 2008 2009 2010 2011 2012 2013Seed 98.2 71.0 116.3 54.0 44.6 44.1 43.3Early stage 491.0 364.5 226.1 277.2 412.6 311.2 332.5Expansion 795.5 616.1 379.5 460.7 472.8 438.8 516.5Later and other stages 966.3 329.2 271.4 401.9 618.3 731.5 1 037.3Total 2350.9 1 380.9 993.4 1 193.8 1 548.3 1 525.5 1929.5Source: thomson reuters, VC reporter, 2013.12 http://dx.doi.org/10.1787/888933194767Other indicatorsthe declining trend in business insolvencies continued into 2013. Specifically, the incidence of insolvencies per thousand businesses fell from 1.8 in 2012 to 1.6 in 2013. this can be partially explained by the fact that domestic demand in Canada has remained relatively strong since the end of the recession, growing at an average annual rate of 2.9% between the third quarter of 2009 and the fourth quarter of 2013. in addition, the business prime rate remains at a historical low. this helps keep small business financing costs low and, as a result, allows them to maintain healthy and more manageable balance sheets.Government policy responsein 2013, the government undertook a number of financing policy measures to help strengthen Canada’s small businesses.117FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADAthe hiring Credit for Small Business, introduced in 2011, was extended to 2013. this measure provided up to CAD 1 000 against a small firm’s increase in its 2013 Employment insurance (Ei) premiums over those paid in 2012. it was available to an estimated 560 000 employers with total Ei premiums of CAD 15 000 or less in 2012, allowing these small businesses to reinvest approximately CAD 225 million in job creation in 2013.through Budgets 2013 and 2014, the government announced its intention to renew andtransform the labour Market Agreements (lMAs) with provinces and territories in 2014, with investments of CAD 500 million per year for 6 years (2014-15 to 2019-20). the lMAs are being transformed into Canada Job Fund Agreements, which includes the introduction of the Canada Job grant (CJg) with a focus on increasing employers’ participation in skills training decisions to ensure that the training provided to workers will be better aligned with job opportunities, particularly in sectors facing skills mismatches and labour shortages. through the CJg, businesses and employer organisations will be eligible for grants of up to CAD 15,000, cost-shared by employers toward eligible training costs, which includes up to CAD 10,000 in government contributions. the lifetime Capital gains Exemption was increased to CAD 800,000 from CAD 750,000 and the new limit was indexed to inflation. this new limit will apply to dispositions in 2014 of qualified small business corporation shares, and qualified farm and qualified fishing property. the first indexation adjustment will occur for the 2015 taxation year.it is estimated that these measures will provide federal tax relief of CAD 5 million in 2013-14 and CAD 15 million in 2014-15.in order to help the manufacturing and processing sector accelerate and undertake additional investment, the government provided CAD 1.4 billion in tax relief over the 2014-15 to 2017-18 period through a two-year extension of the temporary accelerated capital cost allowance for new investment in machinery and equipment.the government also provided CAD 920 million to renew the Federal Economic Development Agency for Southern Ontario (FedDev Ontario) for five years, starting on April 1, 2014. Of this funding, CAD 200 million was allocated for a new Advanced Manufacturing Fund (AMF) in Ontario for five years, starting on April 1, 2014. the AMF supports investments that create new and innovative products or production methods, with market entry or commercialisation within five years. the renewal provides new opportunities to create and grow businesses, cultivate partnerships and build strong communities across southern Ontario. the Agency continues to deliver,programs that strengthen the economy and position the region to compete globally. in December 2013, FedDev Ontario launched a new suite of initiatives, the Southern Ontario prosperity initiatives: ● investing in Business growth and productivity: Assists existing southern Ontario businesses to adopt new technologies that have the potential to improve productivity and expand their operations. ● investing in Business innovation: Fosters a more competitive southern Ontario economy by encouraging the development of partnerships between entrepreneurs and investors to support early-stage, globally-oriented businesses with the ability to become world-leading innovators. ● investing in Commercialisation partnerships: Addresses innovation and commercialisation, and encourages collaboration to improve Ontario’s productivity performance so that the region can compete on an international platform. 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADA118 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 ● investing in regional Diversification: Designed to build stronger, more diverse economies in southern Ontario communities in the long term by leveraging unique assets and local expertise, and by creating opportunities for economic growth and development in communities across southern Ontario.recognising the importance of helping smaller companies go global, Export Development Canada (EDC) introduced a “Stretch credit” philosophy in their Accounts receivable insurance programme, under which the approval guidelines for credit request of up to CAD 50K (for high risk buyers) and CAD 100,000 (for moderate risk buyers|) have been simplified. this is expected to result in both an increase in the number of credit approvals for Canadian SMEs on their foreign buyers, and overall a faster turnaround for the customer.new regulations governing EDC’s domestic activities were implemented on March 11, 2014. A government review found that while EDC’s temporary domestic powers had contributed positively to providing additional credit and insurance capacity since 2009, these broad powers were no longer required. in line with EDC’s export-related mandate, the regulatory amendments allow EDC to provide domestic support (financing, guarantees and insurance) to companies that have at least 50% of their total annual sales in the export and foreign markets. the regulations also require that EDC’s domestic transactions complement those of the Business Development Bank of Canada (BDC) and private sector institutions.in recognition of the important role that young, high-potential firms play in promoting economic growth and job creation, Economic Action plan 2013: ● provided CAD 20 million, over three years, for a new pilot programme, the Business innovation Access programme, to be delivered through the national research Council’s industrial research Assistance programme (nrC-irAp). this funding will be available to SMEs starting in 2014, to help them access business services or technical assistance at Canada’s learning institutions and publicly-funded research organisations to bring bigger and better innovations to market faster. ● provided CAD 325 million over eight years to Sustainable Development technology Canada to continue support for the development and demonstration of new, clean technologies that create efficiencies for businesses and contribute to sustainable economic development. ● provided CAD 60 million over five years, through the Canada Accelerator and incubator programme (CAip) delivered through nrC-irAp1. CAip aims to help outstanding and high-potential incubator and accelerator organisations in Canada expand their services to entrepreneurs. Funding will be provided to a limited number of accelerators and incubators over a five year period in the form of non-repayable contributions. Contributions will support incremental activities that expand the overall service offerings to early-stage firms and entrepreneurs, and promote a higher output of SMEs that are investment-ready and able to develop into sustainable, high-growth businesses. ● Made available CAD 100 million through the BDC for strategic partnerships with business accelerators and co-investments in graduate firms, which will be distributed over 5 years at a projected CAD 20 million a year. ● Established the BDC Entrepreneurship Awards, which celebrate the achievements, mentorship, risk-taking, and resilience of Canadian entrepreneurs while rewarding recipients with monetary and non-monetary prizes.119FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADA ● provided CAD 18 million in support over two years to the Canadian youth Business Foundation (now Futurpreneur Canada). Futurpreneur Canada is a non-profit organisation that provides young entrepreneurs with loans, mentoring and business services.in addition, the prime Minister announced the Venture Capital Action plan in January 2013, a comprehensive strategy for deploying CAD 400 million in new capital over the next 7 to 10 years to reinvigorate the venture capital sector in Canada. the plan recognises the need to demonstrate that Canada’s innovative firms represent superior return opportunities, and that private sector investment and decision-making is central to long-term success. in particular, the Venture Capital Action plan is making available: ● CAD 350 million to establish or recapitalise up to four large scale private sector-led funds of funds (a funds of funds portfolio consists of investments in several venture capital funds) in partnership with institutional and corporate strategic investors, as well as interested provinces and ● an aggregate investment of CAD 50 million in a few high-performing venture capital funds in Canada.Significant progress has been made in implementing the VCAp. Following a rigorous selection process and based on the recommendations of a private sector Venture Capital Expert panel, the government announced in fall 2013 the selection of high-performing venture capital funds in Canada to receive an aggregate investment of CAD 50 million from the government. the government is also continuing to advance the establishment of up to four private sector-led large scale funds of funds, which is expected to attract close to CAD 1 billion in private sector investments. On January 21, 2014, the government announced the first closing of the northleaf Venture Catalyst Fund with CAD 217 million in commitments, in Box 6.1. Definition of Small Businesses used in Canada’s SME and Entrepreneurship ScoreboardCountry definitionthe national definition is used for certain indicators in the OECD Scoreboard for Canada. it is based on the number of employees: 1-99 employees for small enterprises; 100-499 for medium-sized enterprises; 500 and greater for large enterprises. All data from the demand side are defined based on the number of employees, 1 to 99.The business size definition used by financial institutionsthe financial definition used in Statistics Canada’s Survey of Suppliers of Business Financing is based on loan size of less than CAD 1 000000 for small businesses, between CAD1000000 and CAD 5 000000 for medium size businesses, and more than CAD 5 000000 for large businesses. this definition is used for the authorised outstanding business loans, total and for SMEs.SME business definition used in the Canadian profilethe Canadian statistics are based on SMEs when possible, but in many instances, due to data limitations, the country profile reports on small businesses with 1-99 employees which represent,98.1% of businesses. As medium-sized enterprises, those with 100-499 employees, only represent 1.7% of Canadian businesses, their exclusion does not have a significant impact on the data or results. 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADA120 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015partnership with private sector investors and the government of Ontario. this is the first private sector-led fund of funds under the VCAp. With an overall target fund size of CAD 300 million, this fund has a generalist investment strategy and will invest primarily in Canadian-based venture capital funds.the government is continuing discussions with private sector lead investors and interested provinces, as well as potential private sector general partners with the goal of establishing three additional funds of funds. two other funds, teralys Capital and Kensington Capital partners, were announced in 2014.table 6.4. Scoreboard for Canada, 2007-13Indicators Units 2007 2008 2009 2010 2011 2012 2013Debt Business loans, SMEs CAD million 83 422 83 363 86 428 85 676 89 118 86 957 90 172Business loans, total CAD million 479 793 533 951 482 290 489 480 503 190 547 854 590 684Business loans, SMEs % of total business loans17.4 15.6 17.9 17.5 17.7 15.9 15.3Business loans, SMEs (flow) CAD million .. .. .. .. 20 176 21669 22 875Business loans, total (flow) CAD million .. .. .. .. 126 181 141 294 151 307Short-term loans, small businesses CAD million 15 056 .. .. .. 6 911 .. ..Long-term loans, small businesses CAD million 21 118 .. .. .. 12 763 .. ..Total short and long-term loans, small businessesCAD million 36 174 .. .. .. 19 674 .. ..Short-term loans, small businesses % of total authorised loans41.6 .. 43.4 36.3 35.1 39.0 46.0Government guaranteed loans, SMEs CAD billion 1.2 1.3 1.2 1.3 1.3 1.1 1.1Direct government loans, SMEs CAD billion 4.4 4.1 5.5 4.7 6.0 5.8 4.6Loans authorised, small businesses CAD million 36 174 .. .. .. 19 674 .. ..Loans requested, small businesses CAD million 42 259 .. .. .. 21 647 .. ..Ratio of loans authorised to requested, small businesses% 85.6 .. 72.1 87.9 90.9 91.5 88.6Interest rate, average % 7.5 .. 6.2 5.8 5.3 5.4 5.6Interest rate, business prime % 6.1 .. 3.1 2.6 3.0 3.0 3.0Risk premium for small businesses % 1.4 .. 3.1 3.2 2.3 2.4 2.6Collateral, small businesses % of SMEs required to provide collateral on last loan47.7 .. 56.1 66.7 64.8 76.0 56.0Equity Venture and growth capital, InvestmentsCAD billion 2.4 1.4 1.0 1.2 1.5 1.5 1.9Venture and growth capital, InvestmentsYear-on-year growth rate,%.. -41.3 -28.1 20.2 29.7 -1.5 26.5Other 90-Day Delinquency Rate Small business% of loans outstanding 0.79 1.05 1.47 0.82 0.60 0.53 0.3390-Day Delinquency Rate Medium business% of loans outstanding 0.10 0.15 0.49 0.24 0.02 0.01 0.01Bankruptcies, total per 1 000 firms 3.1 3.1 2.9 2.2 2.0 1.8 1.6Source: refer to table 6.5.12 http://dx.doi.org/10.1787/888933194779121FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADAFigure 6.4. Trends in SME and entrepreneurship finance in Canada 0100 000200 000300 000400 000500 000600 000700 000200920082007 2010 2011 2013201201234567200920082007 2010 2011 2013201201020304050607080901002007 2009 2010 2011 2012 2013020 00010 00030 00040 00050 00060 00070 00080 00090 000100 00060100959085807570652007 2011 201201 5001 0005002 0002 5003 0003 500065432178920072008200920102011201220131998199920002001200220032004200520062007200820092010201120132012199819971999200020012002200320042005200683 422 83 363 86 428 85 676 89 118 86 957 90 172 533 951 482 290 489 480 503 190 547 854 590 684 479 793 4.44.15.54.76 5.84.41.2 1.3 1.2 1.3 1.3 1.1 1.0- -36 174 19 674 42 259 21 647 86 91 92 47.756.166.7 64.876.056.052.343.933.3 35.2248.16.35.7 5.85.24.84.2 4.13.53.1 3.1 2.92.2 2 1.8 1.6Business loans, SMEs Business loans, totalDirect government loans, SMEsGovernment guaranted loans, SMEsLoans authorised Loans requestedCollateral, SMEs (% of SMEs not required to provide collateral)Collateral, SMEs (% of SMEs required to provide collateral)Annual, in CAD million Annual, in CAD millionAnnual, % of small businesses required to provide collateral Annual,CAD million (LHS) and ratio (%, RHS)Annual, in CAD million Annual, per 1 000 firmsA. SME loans1 and total business loans, 2007-13 B. SMEs2 government guaranted loans and direct loans, 2007-13C. Collateral requirements for small businesses3, 2007, 2009-13 D. Loans requested and authorised, small businesses3, 2007, 2011E. Venture and growth capital invested by stage, 1997-12 F. Business bankruptcies, 1998-13Bankruptcies per 1 000 businessesExpansion/later stagesSeed and startup Other early stagePatio of loans authorised to requestedNotes: 1. SME loans defined as loans authorised up to CAD 1 million. 2. SMEs are defined as firms with annual sales less than CAD 25 million. 3. Small businesses are defined as firms with 1-99 employees.Sources: Charts A, C, D: Statistics Canada. Chart B: Export Development Canada, Business Development Bank of Canada, Canada Small Business Financing programme. Chart E: thompson reuters Canada, industry Canada VC Monitor. Chart F: Office of the Superintendent of Bankruptcy Canada.12 http://dx.doi.org/10.1787/888933193780 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADA122 FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015table 6.5. Definitions of indicators for Canada’s ScoreboardIndicators Definitions SourcesDebt Business loans, SMEs Commercial loans to SMEs (defined as the value of amounts authorised up to CAD1million), amount outstanding (stocks). Includes term loans, mortgage loans, lines of credit, credit cards. Excludes leases, credit provided to subsidiaries/affiliates, factoring. Excludes non-employer firms.Statistics Canada, 2007-2011 Survey of Suppliers of Business FinancingBusiness loans, total Commercial loans to all enterprises, amounts outstanding (stocks). Includes term loans, mortgage loans, lines of credit, credit cards. Excludes leases, credit provided to subsidiaries/affiliates, factoring. Excludes non-employer firms.Statistics Canada, 2007-2011 Survey of Suppliers of Business FinancingValue of disbursem*nts (term credit)Large (authorisation levels of CAD 5 million or more), Medium (authorisation between CAD 1 and CAD C 5 million) and Small (authorisation lower than CAD 1 million).Statistics Canada, 2011 Survey of Suppliers of Business FinancingShort-term loans, Small businessesOperating line (short-terms loans, 12 months or less, lines of credit, credit cards), flows. Small businesses are enterprises with 1-99 employees.Statistics Canada, 2007 Survey on Financing of Small and Medium Enterprises and Industry Canada, 2009, 2010, 2012 and 2013 Supplementary Survey on Credit Conditions and Statistics Canada, 2011 Survey on Financing and Growth of Small and Medium Enterprises Long-term loans, Small businessesTerm loan (more than 12 months) or mortgage, flows.,Small businesses are enterprises with 1-99 employees.Statistics Canada, 2007 Survey on Financing of Small and Medium Enterprises and Industry Canada, 2009, 2010, 2012 and 2013 Supplementary Survey on Credit Conditions and Statistics Canada, 2011 Survey on Financing and Growth of Small and Medium Enterprises Government guaranteed loans, SMEsGuaranteed loans for SMEs, flows from central government, guaranteed loans by the Canadian Small Business Financing Programme (CSBFP), Export Development Canada (EDC) and Business Development Bank of Canada (BDC).Administrative data from Export Development Canada, Business Development Bank of Canada and the Canada Small Business Financing ProgrammeDirect government loans, SMEsDirect loans to SMEs, flows from central government. Administrative data from Export Development Canada and Business Development Bank of CanadaLoans authorised, Small businessesFlows—all small business loans. Small businesses are enterprises with 1-99 employees.Statistics Canada, 2007 Survey on Financing of Small and Medium Enterprises and Industry Canada, 2009, 2010, 2012 and 2013 Supplementary Survey on Credit Conditions and Statistics Canada, 2011 Survey on Financing and Growth of Small and Medium Enterprises Loans requested, Small businessesFlows—all small business loans. Small businesses are enterprises with 1-99 employees.Statistics Canada, 2007 Survey on Financing of Small and Medium Enterprises and Industry Canada, 2009, 2010, 2012 and 2013 Supplementary Survey on Credit Conditions and Statistics Canada, 2011 Survey on Financing and Growth of Small and Medium Enterprises Interest rate, average Average annual interest rate for all new small business terms loans and non-residential mortgage, base rate plus risk premium; excludes credit card.Statistics Canada, 2007 Survey on Financing of Small and Medium Enterprises and Industry Canada, 2009, 2010, 2012 and 2013 Supplementary Survey on Credit Conditions and Statistics Canada, 2011 Survey on Financing and Growth of Small and Medium Enterprises Interest rate, business primeThe chartered banks’ rates on prime business loans are the interest rates charged to the most creditworthy borrowers.Bank of Canada, Banking and Financial StatisticsRisk premium for Small businessesDifference between interest rate paid by small business and business prime.Bank of Canada, Banking and Financial StatisticsCollateral, Small businessesPercentage of small businesses that were required to provide collateral to secure their latest loan. Small businesses are enterprises with 1-99 employees.Statistics Canada, 2007 Survey on Financing of Small and Medium Enterprises and Industry Canada, 2009 and 2010 Supplementary Survey on Credit ConditionsEquity Venture and growth capitalActual amounts of venture and growth capital invested. Includes seed, start up, early stage and expansion. All enterprises.Thompson Reuters Canada, Industry Canada VC Monitor123FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: CAnADANote1. Economic Action plan 2014 provided an additional CAD 40 million, bringing the total available to help outstanding and high-potential incubator and accelerator organizations through the CAip to CAD 100 million.ReferencesBank of Canada (2013), “Senior loan Officer Survey Series for 2012” (Q1, Q2, Q3, Q4), www.bankofcanada.ca/publications-research/periodicals/slos/industry Canada (2013a), SME Financing Data initiative, 2013, “Bi-annual survey of suppliers of business financing data analysis, first half 2012 and second half 2012”, www.ic.gc.ca/eic/site/ 061.nsf/eng/h_01569.htmlindustry Canada (2013b), SME Financing Data initiative, “Survey on Financing of Small and Medium Enterprises”, www.ic.gc.ca/eic/site/061.nsf/eng/h_01570.htmlindustry Canada (2014a), SME Financing Data initiative, “Survey on Credit Condition”, www.ic.gc.ca/eic/site/061.nsf/eng/h_02192.htmlindustry Canada (2014b), SME Financing Data initiative, “Survey of Suppliers of Business Financing”, www.ic.gc.ca/eic/site/061.nsf/eng/h_01569.htmlStatistics Canada (2013), “Biannual Survey of Suppliers of Business Financing Data Analysis, Second half 2012”. www.ic.gc.ca/eic/site/061.nsf/eng/02771.htmlIndicators Definitions SourcesOther 90-day Delinquency Rate Business size is defined according to high-credit (that is, the maximum amount of credit a business once had outstanding, as reported in the PayNet database). Small borrowers are those with a high credit of less than CAD 500,000 and Medium-sized borrowers are those with high credit of more than CAD 500,000 but less than CAD 2 million. Delinquency rate calculation: 90+ day delinquency rates are calculated by dividing the amount of loan interest and principle payments more than 90 days overdue by the total balance of loans outstanding.PayNet Inc.Bankruptcies, total Business insolvency is defined as the number of bankruptcy and proposal cases. All enterprises.Office of the Superintendent of Bankruptcy Canadatable 6.5. Definitions of indicators for Canada’s Scoreboard (cont.)FinAnCing SMES AnD EntrEprEnEurS 2015 © OECD 2015124 4. COuntry prOFilES OF SME AnD EntrEprEnEurShip FinAnCing 2007-13: ChilEChileSMEs in the national economyin Chile, SMEs account for the overwhelming majority of the total number of enterprises. in the commercial year 2012, 98.5% of the firms were classified as SMEs, including employer and non-employer enterprises in all industries. Microenterprises made up 75.2% of the total number of firms; whereas small and medium accounted for 20.2% and 3% of the total respectively. Although SMEs represent almost all of the enterprises, they only account for 16% of the total amount of annual sales. likewise, according to the statistics of the internal revenue Service (Servicio de impuestos internos, Sii) SMEs accounted for 46% of the payroll of Chilean firms in the commercial year 2012.the more accepted definition of SMEs in Chile is based on the annual turnover criterion according to law 20,4161, the financial industry makes use of a different definition based on the size of the loan amount, as indicated in Box 7.1.table 7.1. Distribution of firms in Chile, commercial year 2012By firm sizeFirm size (annual turnover) Number %All enterprises 846 809 100.0SMEs (up to CLP 100 000) 834 805 98.5Micro (up to CLP 2 400) 637 111 75.2Small (CLP 2 400 to CLP 25 000) 171 237 20.2Medium (CLP 25 000 to CLP 100 000) 25 737 3.0Large (CLP 100 000+) 12 724 1.5Note: data includes employer and non-employer enterprises in all industries; uF (unidad de Fomento) is an indexed unit of account that incorporates adjustments based on increases in the general level of prices in the Chilean economy in order to preserve the purchasing power (real value) of assets denominated or indexed to this unit of account. the uF of July 31, 2014 stood at Clp 24,060.07. SMEs in Chile are firms with annual sales of up to Clp 100000.Source: internal revenue office of Chile.12 http://dx.doi.org/10.1787/888933194789Macroeconomic contextthe economic activity of the Chilean economy moderated in 2013 with an annual growth rate of 4.1% compared to a 5.4% in 2012. the downward trend of the economic activity has continued in the months leading up to July 2014. the last edition2 of the Chilean Central Bank (ChCB) Monetary policy report (Informe de Política Monetaria, ipOM) points out to a slower evolution of the economic activity and the domestic demand during the first half of 2014. the ipOM explains that the rate of investment, especially accumulation of fixed assets, has