Food firms could benefit from SME financing plans

Small and medium enterprises (SMEs) make up an dynamic and innovative force in European food and beverage landscape. According to the latest data from the CIAA, SMEs (less than 250 employees) make up 99.1 per cent of the EU’s 310,000 food and drink companies, generating 48.7 per cent of industry turnover and directly employing 63 per cent of the workforce.

However SMEs ability to access the funds they need to innovate and to grow, as well as to weather tough economic conditions, has long been a source of concern. Moreover, they may be less agile to deal with requirements imposed by new legislation than their larger counterparts.

Now, however, the European Commission looks to be taking the SME credit situation seriously. The SME Finance Forum 2010 was held in Brussels yesterday, focused on new strategies to increase SMEs’ access to finance. A proposal has been made for the SME Finance Forum to be upgraded in the future to become a place for dialogue between financial institutions and SMEs, to monitor market developments, and improve SME access to financial markets.

European Commission Vice-President Antonio Tajani said he is making SMEs’ ability to exit the recession and achieve growth one of his top priorities. “We should not forget - SMEs are the backbone of the European economy and the job generators of Europe. In tough times we need them more than ever to get the European economy going."​

European Commissioner Michel Barnier said: "I am very aware how difficult it can be for SMEs to access the finance they need to prosper. And I want SMEs to be put back at the heart of the internal market. ​

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I firmly believe that capital markets must remain attractive to SMEs. One improvement would be for listing requirements to be proportionate to the size of issuers - without undermining investor protection. And we also need to act to attract investors' interest in smaller issuers."​

Data from the European Commission and the European Central Bank shows that 83 per cent of banks did not alter their tough credit conditions to SMEs in the recession, and almost 20 per cent of loan applications by SMEs are turned down.

Private equity targets?​

Bob Henry, a partner at Matrix Private Equity Partners, observed that the recession has thrown up opportunities for private equity to invest in more SMEs in the food sector if they have a unique product and a diverse customer base.

Talking to FoodNavigator.com last year, Henry pointed out that big retailers extend the amount of credit required from their suppliers in the recession, which puts small companies under financial pressure. With banks unwilling to extend more credit to them in turn, this makes struggling suppliers a target for acquisition.