The Impact of the Recent Financial Crisis on the Financing of European SMEs

Lack of financing is an important obstacle for growth and development of small and medium-sized enterprises all over the Europe. This paper reveals the effect of the sovereign stress on the financing of small businesses from Euro area economies that have suffered most, denoted as stressed economies. The main finding is that 37% of the firms in the researched sample were either rejected on their loan application or their loan application was accepted but refused due to high costs. Also, the heterogeneity across firms plays a significant role when it comes to loan granting, older firms with higher turnover are less likely to be rejected on their loan application. The firms in the stressed countries are most likely to be refused in their bank loan application after the crisis unfolded and have a higher probability of not applying to a bank loan compared to the firms from the non-stressed economies.