Financing solutions to sustain the growth of SMEs and MTEs and lay the foundations for future competitiveness

A. Caudoux and J. Geoffroy

Financial Stability Review, 2015, issue 19, 37-49

Abstract: Broadly, the lack of business investment over the last 15 years, especially in terms of quality, has undermined French companies’ competitiveness and their growth potential. Small and mid-sized enterprises (SMEs), along with mid-tier enterprises (MTEs), play a key role in France’s economy and are now wrestling with the challenges of worldwide competition in terms of productivity gains, innovation and international expansion. Hence, their financing needs are becoming more diverse and finding appropriate solutions will be crucial. At the same time, developments in the financial system since 2008 have continued to bring radical changes both to the financing solutions on offer and to investors’ expectations. This has paved the way for a wider range of financing instruments to underpin or supplement bank lending, still the predominant form of financing in France. Numerous initiatives are currently underway and the outlines of a new financing model for SMEs and MTEs are still being sketched. Bpifrance aims to strengthen the capacity of market participants that provide financing for SMEs and MTEs, especially banks and private equity fund managers. It also encourages them or partners with them to develop innovative and supplementary solutions. It has two main ways to achieve these ends: firstly, in-depth knowledge of businesses, their plans and their risk profiles, stemming from a legacy of strong local presence throughout France through a network in constant contact with customers; and secondly, a risk-taking capacity backed up by a sound balance sheet.

Date: 2015
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