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Challenges in SME Access to Capital

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Challenges in SME Access to Capital

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New financing models can keep entrepreneurship alive in the United States.

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7

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  • Innovative

Recommendation

In the United States, small and medium-sized enterprises (SMEs) often lack capital, and that poses a threat to American entrepreneurialism, according to crowdfunding expert Richard Swart. He outlines the challenges that start-ups and young companies face in obtaining financial support, and he describes some of the novel sources of credit and investment that technology has made possible, while highlighting their drawbacks as well. getAbstract recommends this SME financing primer to budding entrepreneurs and small-business investors.

Summary

The rate of new business formation in the United States has been in decline for longer than a decade, largely due to a lack of access to finance for small and medium-sized enterprises (SMEs). Banks often consider SMEs to be high-risk, high-cost, low-profit borrowers, and conventional loan regulations require business owners to pledge property as collateral and provide extensive financial statements. Many entrepreneurs aren’t financially literate, adding to their difficulty in obtaining cash. A growing risk aversion and the mounting costs of regulatory compliance are also dampening entrepreneurship...

About the Author

Richard Swart is a research scholar at the University of California Berkeley and an adviser to the Bill and Melinda Gates Foundation.

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