Is there a finance gap for SMEs? Some evidence from recent studies in Scotland and London

The aim of this paper is to investigate whether or not there is still finance gap for SMEs. The paper draws on evidence from two recent studies relating to accessing external finance by Scottish and London SMEs in order to assess the extent and nature of gaps in the market for SME finance. The studies have therefore been conducted in a Western European economy which is generally recognised as having a well developed financial infrastructure and venture capital/equity market compared to many transition and emerging economies. The Scottish study utilised an innovative methodology combining demand side interviews with SME owner-managers who had reported difficulties with accessing finance with supply side interviews with bank managers. It focused on actual business propositions using verbal protocol analysis. Similarly, the London study has also been concerned with obtaining demand and supply side perspectives, combining interviews with SME owner-managers, accountants and enterprise agencies on the one hand with interviews with banks, equity providers and financial advisers on the other. The findings from both studies suggest that there continue to be specific gaps in the SME finance market and that these are most apparent in the cases of manufacturing SMEs, start-up and young firms, and businesses led by women and black and ethnic minority entrepreneurs. These are areas where there is, at least within a British context, a strong case for various forms of public intervention.

Access to full text restricted pending copyright check.