Developing EU Capital Markets for SMEs: Mission impossible?

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Bank lending is the most common source of external finance for SMEs, but it doesn’t suit all of them. Young, innovative and fast-growing SMEs, in particular, do not have the required cash flows and collateral for bank financing and need alternatives to unlock their growth potential. Market-based finance is one alternative to help finance the activities of these SMEs. The European Commission’s renewed activities to develop market-based financing need to be stepped up in order to develop a credible capital market to finance SMEs in the EU.

Apostolos Thomadakis, Ph.D. is Researcher at the European Capital Markets Institute (ECMI).