Results of the survey to SMEs Draft Overview in view of the Stockholm Workshop 19/09/2019

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Feasibility Study

...

Results of the survey to SMEs

Draft Overview in view of the Stockholm Workshop

19/09/2019

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Note authors Dr. Pierre Padilla, N-ABLE Dr. Vincent Duchêne, IDEA Consult

Coordination & editing Johannes Lith, Project Manager – AIP,

Regional Council of Lapland

Graphic design Lasse Paldanius

The following note reflects upon the survey launched in the context of the feasibility analysis of an Arctic Investment Platform. It draws preliminary findings on the demand side of SME financing in the NSPA area. All respondents were listed

by NSPA regional contact points who worked toward generating responses for the survey. The results are to be discussed by the Financial Expert Group to gather in Stockholm on 23/09/2019. These should be considered with caution

given the early study stage.

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Background Evidence

T

he Arctic Investment Platform (AIP) feasibility study focuses on the poten- tial of investing in “Digitisation and Natural Resources enhancing the Arctic Economy”. The targeted key added value of a possible AIP (regardless of its form) is expect- ed to be an increase to the added value of the sustainable use of Arctic Natural Resources and Digital capabilities across industrial value chains.

To evaluate the potential of such Platform and possible key modalities, a qualitative enquiry led to the pre-feasibility assessment that gathered qualitative evidence over possible investment projects in need of public support. This first step demonstrated the existence of a need.

A second step was however needed to further quantify the reality underlying the needs identi- fied along the first phase, as well as the extent to which they could correspond to various forms of financing sources.

...

1. Introduction

The SME survey was meant to further evaluate the demand side of financing.

It was expected to provide visibility over investment needs and investment project claims from SMEs across the NSPA as to determine whether or not there could be a pipeline relevant to finance. The SME survey was launched on 04/06/2019 and closed on 31/08/2019. It entailed two key reminders, one a week after the launch and the other early August 2019. Over a panel of 684 targeted respondents, 67 responded to the questionnaire (for a response rate of 9.8%), 47 of which completed the questionnaire entirely – for 20 partially completed questionnaires. 9 declined and a total of 40 invitations were bounced, leading to an effective response rate of 10.4%.

The Financiers survey was meant to provide an overview of the supply side of financing across the regions. It was targeted at organisations and individuals funding and/or financing SMEs across the 14 NSPA regions. The Financiers survey was launched on 04/06/2019 and closed on 31/08/2019.

It entailed a reminder one week after the launch of the survey. Over a panel of 139 targeted respondents, 25 responded to the questionnaire (for a response rate of 18%), 20 of which completed the questionnaire entirely – for 5 partially completed questionnaires. 1 declined and a total of 4 invitations were bounced, leading to an effective response rate of 18.1%.

In order to do so, the Experts mandated by the NSPA organized two surveys:

Based on the budget reserve linked to an INTERREG project to support their effort, NSPA Regional contact points were requested to be active in promoting each survey regionally, con- tacting individual organisations and unlocking re- sponses along the months of June-August 2019.

The following sections depict the results of SME survey. It is to be considered an interim note that will be further integrated into the final report to be submitted by the experts by the end of 2019 to conclude on the relevance and possible format of an AIP.

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T

he SME Survey led to a low response rate that required an additional re- minder in August. The distribution of companies along the pyramid of sizes is however quite in line with the patterns usually observed across Europe and the NSPA: 93 % of the companies declared to have 50 employees or less and only 1% ranked above 250 employees (see Figure 1).

2. Survey to NSPA SMEs

2.1. Distribution of Respondents

...

Figure 1: Size Distribution across

SME Survey Respondents. Source: the authors, 2019

The geographical distribution of SME respond- ents shows that although 3 Regions performed better than the others (with a total of 52% of all responses), 2 NSPA Regions are not at all repre- sented and most regions (9 of them) fall to 3% or below. This disparity positions the weight of the survey results over 12 regions, 6 of which gath- ered more respondents (see Figure 2).

The sectorial spread of SME respondents across NACE sectors shows some diversity as illustrated in Figure 3. Still, when considered at NACE-1 level, many companies show a link to Information and Communication Technology (ICT) which occupies the first rank of the pyramid; while manufacturing also appears to be well represent- ed, with more diversity shown at the NACE-2 level. This insight provides a first characteristic of the overall pipeline screened through the present survey.

Figure 2: Geographical Distribution across SME Survey Respondents.

Source: the authors, 2019

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Figure 3: Sectorial Distribution of SME Survey Respondents.

Source: the authors, 2019 The NACE classification is in line with the affilia-

tion of SMEs with priority themes of the AIP as defined during the previous AIP workshop (held in March 2019). Figure 4 illustrates the allocation of SME survey respondents across these areas, showing a predominance of “Digital” companies (45%) while mining and metal, wood and forest- ry, as well as other natural product industries (re- spectively 26%, 24% and 21%) , ranked second third and fourth with a similar amount of SMEs.

Although not visible in the figure, one should note that some companies who selected “Digital”

also selected other areas such as mining and metal industries (5), wood and forestry (5) and water (3).

Similar observations can be made for the other sectors which mostly encompass links between these 3 sectors and Digital. It is for instance not the case for other natural products which only encompassed one respondent (who selected a second area).

Figure 4: Distribution of SME Survey Respondents across key Arctic thematic areas.

Source: the authors, 2019 The survey shows that although a few

regions are lagging in terms of response rate, interests are matched across

respondents, of whom 93% are SMEs with less than 50 employees: they are mainly oriented toward ICT and manufacturing industries while Digital ranks on top of the areas targeted by SME respondents. Other areas remain of key importance such as mining and metal, wood and forestry but also water, all appearing to be interlinked through respondents active in several areas.

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R

espondents were questioned on the key trends in their market. The first con- cerned market growth, which was point- ed at as growing for 97% of all respond- ents (see Figure 5).

Such trend translated into a rather steady growth over the past 3 years in most companies, 58% accounting for growth in fixed assets, 61%

in earnings and 65% in total revenue. Nearly a third of SME respondents however pointed to a stagnation in all three categories, while a minori- ty (less than 10%) declared a declining trend over the past 3 years – see Figure 6.

In these growth conditions, SMEs identified key drivers for investing and seeking investment.

“New products” and “New markets” were iden- tified as the top reasons for seeking investment (respectively gathering the interest of 80% and 78% of respondents). They are followed by “New business model” (42%) and “More effective mar- keting campaign” (31%) before dropping to rea- sons gathering 20% of interests or less.

2.2. Market Characteristics

...

Figure 6: Business Growth for the past 3 years.

Source: the authors, 2019

Figure 5: Self-declared market growth.

Source: the authors, 2019

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Figure 7: Key reasons to seek investment.

Source: the authors, 2019

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While 97% SME Respondents see a growing market, nearly 60%

have been following a growth track for the past three years.

SME respondents are now willing to commercialize new products (80% of respondents) and move to

new markets (78%), both drivers being the main reason for seeking

investment.

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A

n analysis of the yearly turnover of SME respondents (Figure 8 shows that half of them (49%) have a rev- enue ranging between less than

€50.000 and €200.000. 37% have a turnover comprised between €200.000 and €2.500.000 (15% of which range between €200.000 and

€500.000, while 22% range between €500.000 and €2.500.000). 86% of the total number of re- spondents thus generates revenue of €2.500.000 or less. Still, 9% of respondents range between

€2.500.000 and €7.000.000 while 4% generate between €7.000.000 and €40.000.000. 2% gener- ate more than €40.000.000.

The variables driving the investment oppor- tunities of respondents are depicted in Figure 9.

The results show that the notions of “new” and

“production” come out of the semantic scan. A review of the reasons provided by the respond- ents was made and allowed for more nuance:

while the large majority of reasons were linked to the commercialisation of new products and services as well as an entrance or expansion in international markets, a surprisingly high num- ber of reasons provided by respondents referred to investments in infrastructure and equipment.

2.3. Investment Potential

...

Figure 9: Investment Opportunities depicted by Respondents: World Cloud.

Source: the authors, 2019

Figure 8: Yearly turnover of SME Respondents in the past 3 years.

Source: the authors, 2019

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Several also referred to the need for an integra- tion of automation technologies into their indus- trial process and a few referred to operational expenditures (mainly related to scaling up teams).

The geographical spread of investments fore- seen by SME respondents (in relation with the investment opportunity discussed in each re- sponse) shows some alignment between the loca- tion of the company and its investment zone. Still, the spread of investment seems to go beyond the NSPA while remaining in the 3 key countries under the scope for 8 of the respondents – 3% of respondents being incorporated in a non-NSPA area. Such spread thus shows that although all regions are concerned, some of the investments could also lead to investing in other Finnish, Norwegian or Swedish regions (spill-over effect).

When asked about the nature of the in- vestment foreseen and underlying expendi- tures, most respondents put forward Capital Expenditures (CAPEX) as the main type of cost category. SME respondents thus highlighted both intangible (62%) and tangible (60%) CAPEX while almost half of all respondents (48%) pointed to the weight of operational expenditures. This sug- gests that although both are relevant, CAPEX most likely drives demand for investment in a majority of cases.

Figure 10: Geographical targets of SME investment projects in the NSPA.

Source: the authors, 2019

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The collaborative nature of the investment was confirmed by Figure 12 which highlights that 81% of respondents considered that their invest- ment would imply the involvement of partners.

This collaborative aspect is key as it potentially confirms the existence of gaps in competences, capabilities or the need to source complementary expertise.

This could very possibly explain why among 42 respondents, 50% would be ready to receive in- vestment through a joint venture – see Figure 13.

Still, most entities (79%) selected the possibility of fuelling the investment through the very legal entity itself while the model of Special Purpose Vehicle (SPC) attracted strictly no interest from respondents

Figure 11: Nature of investment sought by SME respondents.

Source: the authors, 2019

Figure 12: Collaborative nature

of the investment. Source: the authors, 2019 Figure 13: Type of structure to receive the investment. Source: the authors, 2019

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The investment opportunities matched the driv- ers put forward by respondents in the first place:

they are mainly characterised by the new market entrance (62% of all respondents) followed by the full commercialisation step (52%) and inter- nationalisation (42%). Next in line is the increase of production efficiency and/or capacity (33%).

Although they ranked lower (respectively 25%

and 21%) than other investment opportunities, piloting and demonstration still are a concern for a fourth of respondents. FOAK and prototyping however remain at the lowest stage of the pyra- mid. While one could expect a variation between companies mainly belonging to “Digital” versus other sectors, this pattern seems to largely apply to all companies in line with previous comment of p.X.

Putting these results in perspective with pre- vious insights, one can conclude that a significant share of investments remains innovation-driven (Piloting/Demonstration/FOAK). One could also for example imagine that “scale” could potentially be a reason linking Figure 14 to the targeted ex- penditures (CAPEX, Figure 11) – as companies highlighted to build new plants or acquire new equipment.

Figure 14: Categorisation of investment opportunities at stake.

Source: the authors, 2019

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When considering the maturity of SMEs with respect to their investment project(s), it is pos- sible to note that half of the respondents (53%) declared having a business plan ready for their investment projects while less than a half man- aged to gather partners and/or (co-)investors, or achieved a pilot or prototype ready to scale and enter the market (43% in both cases). Figure 15 also shows that 9 respondents (18% of respond- ents to this question) reached the stage where they have a demonstration line.

The most recurring investment need estimate is €1.000.000,00. It is followed by €500.000,00.

The diversity of amounts presented in the raw data is showcased in Figure 16.

Except for one respondent who replied

‘3500000000’ and another one who replied ‘0’, the responses were more precisely distributed (for the 48 remaining respondents) as follows (see Figure 17).

Figure 16: Total investment cost (in €) announced by SME Respondents (n:50).

Source: the authors, 2019

Figure 15: Self-declared maturity of SME investment projects.

Source: the authors, 2019

Figure 17: Total investment cost (in €) announced by SME Respondents – Distribution. Source: the authors, 2019

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Clustering the investment needs under stylized ranges allows for a more comprehensive view of the above results: Figure 18 therefore highlights the overwhelming need of investments ranging between €500.000,00 and €3.000.000,00 (50%

of the total needs put forward by respondents among 42% ranging between €500.000,00 and

€1.500.000,00); and the remaining weight of in- vestment needs below €500.000,00 (29%).

SMEs also shared indications concerning their potential level of financial contribution to the pro- ject. While discrepancies can be found which are visible in Figure 19 (due to wrong numeric indica- tions provided by the respondents), the most fre- quent answer pointed to 50% (followed by 20%

and 30%) of private contribution to the targeted investment.

Out of the 37 companies who replied in an ap- propriate fashion (see Figure 20, left-hand side), 30% declared to be ready to co-fund their invest- ment by 50%, while 17% were ready to co-fund 20% and 14% were ready to commit 30%. 11%

also referred to 5% co-funding.

A clustering effort (Figure 20, right-hand side) leads to the conclusion that a third of SMEs is willing to contribute 15% or less, while another third is read to contribute between 15% and 35%

and the last third between 35% and 80%.

Figure 18: Total investment cost (in €) announced by SME Respondents – Clustering.

Source:

the authors, 2019

Figure 19: SME willingness to co-fund the opportunity – feedback overview (n:50).

Source: the authors, 2019

Figure 20: SME willingness to co-fund the opportunity – in % of investment.

Source: the authors, 2019

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One should also note that one company provided a random number and was set aside the analy- sis. On top of the 37 responses from the above Figure X comes a set of companies who provided feedback in full amount. Such feedback still ap- pears to be worth sharing as it shows that out of 12 respondents, 7 declared a willingness to co- fund €100.000 or more – see summary presented in Table 1:

One should also note that one company provided a random number and was set aside the analysis. On top of the 37 responses from the above Figure X comes a set of companies who provided feedback in full amount. Such feedback still appears to be worth sharing as it shows that out of 12 respondents, 7 declared a willingness to co-fund €100.000 or more – see summary presented in table X:

Table X: SME willingness to co-fund the opportunity – remaining 12 respondents (assumed in €) Amount Number of

respondents

500000 2

300000 1

200000 3

100000 1

50000 1

20000 2

10000 2

Source: the authors, 2019 Figure X depicts the trajectory in place to finance the investment opportunities at stake. It shows that debt is the leading financial product pursued by SMEs (50% of them selected this option) while own funds follow (42%). The injection from either corporate or shareholding investors comes next (with respectively 38% and 36% of SMEs subscribing to that end), before dropping to hybrid forms (20%) and new (quasi-)equity (12%).

Figure X: Trajectory currently in place to finance the investment opportunity

Source: the authors, 2019

Figure X below exposes the expected revenue from SME investments broken down into several tranches. It shows that while 35% of SMEs expect to generate between €1.000.000,00 and

€5.000.000,00 out of their investment, 24% expect a smaller revenue stream (below €1.000.000,00).

Still, 24% expect a revenue generation level reaching between €5.000.000,00 and €10.000.000,00 while 13% target more than €15.000.000,00 (bringing the overall pattern to a total of 72% of SMEs expecting to generate a turnover ranging between €1.000.000,00 and more than 15.000.000,00).

Table 1: SME willingness to co- fund the opportunity – remaining 12 respondents (assumed in €) Source:

the authors, 2019

Figure 21 depicts the trajectory in place to fi- nance the investment opportunities at stake. It shows that debt is the leading financial product pursued by SMEs (50% of them selected this op- tion) while own funds follow (42%). The injection from either corporate or shareholding investors comes next (with respectively 38% and 36% of SMEs subscribing to that end), before dropping to hybrid forms (20%) and new (quasi-)equity (12%).

Figure 21: Trajectory currently in place to finance the investment opportunity.

Source: the authors, 2019

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Figure 22 on the right exposes the expected revenue from SME investments broken down into several tranches. It shows that while 35% of SMEs expect to generate between €1.000.000,00 and €5.000.000,00 out of their investment, 24% expect a smaller revenue stream (below

€1.000.000,00). Still, 24% expect a revenue gen- eration level reaching between €5.000.000,00 and €10.000.000,00 while 13% target more than

€15.000.000,00 (bringing the overall pattern to a total of 72% of SMEs expecting to generate a turnover ranging between €1.000.000,00 and more than 15.000.000,00).

Hypotheses can be drawn from the present data. For example, one could break down the ex- pected revenues into three categories, assuming that the self-declared revenue expectations could be achieved. Such categories would therefore assume three scenarios:

1) One in which the maximum amount (of total expected revenues) would be achieved – with a maximum threshold set at 20 million Euros;

2) One where the average amount of expected revenue would be achieved (based on an average between max. and min. amounts as presented in the survey);

3) One where the minimum expectations would be achieved – with a minimum threshold set at fifty thousand Euros.

Figure 22: Trajectory currently in place to finance the investment opportunity.

Source: the authors, 2019

These hypotheses are presented in Table 2, showing that based on SME declarations, a suc- cessful “minimum” scenario could potentially lead to a €181.550.000 turnover, at while a “maxi- mum” scenario could represent a turnover gener- ation of €351.000.000. Such figures are however

to be taken with extreme care as they do not account for costs (and thus RoI, IRR, etc.) and do not take into account any risk. They are just purely theoretical and only provide indications on possible volumes based on aggregated SME claims.

Figure X: Revenue expected from the investment

Source: the authors, 2019 Hypotheses can be drawn from the present data. For example, one could break down the expected revenues into three categories, assuming that the self-declared revenue expectations could be achieved. Such categories would therefore assume three scenarios:

1) One in which the maximum amount (of total expected revenues) would be achieved – with a maximum threshold set at 20 million Euros;

2) One where the average amount of expected revenue would be achieved (based on an average between max. and min. amounts as presented in the survey);

3) One where the minimum expectations would be achieved – with a minimum threshold set at fifty thousand Euros.

These hypotheses are presented in Table X, showing that based on SME declarations, a successful

“minimum” scenario could potentially lead to a €181.550.000 turnover, while a “maximum” scenario could represent a turnover generation of €351.000.000. Such figures are however to be taken with extreme care as they do not account for costs (and thus RoI, IRR, etc.) and do not take into account any risk. They are just purely theoretical and only provide indications on possible volumes based on aggregated SME claims.

Table X: Revenue expected from the investment: assumptions over possible pipeline levels Number of

Respondents Max Average Min

Unitary

amount Result Unitary

amount Result Unitary

amount Result

11 1000000 11000000 525000 5775000 50000 550000

16 5000000 80000000 3000000 48000000 1000000 16000000 11 10000000 110000000 7500000 82500000 5000000 55000000 2 15000000 30000000 12500000 25000000 10000000 20000000 6 20000000 120000000 17500000 105000000 15000000 90000000

351000000 266275000 181550000

Source: the authors, 2019 Profitability is expected by respondents to be found between 1 and 3 years (for 46% of respondents) and between 3 to 5 years (41%). Only 13% of respondents consider a longer time perspective with a Table 2: Revenue

expected from the investment: assumptions over possible pipeline levels. Source:

the authors, 2019

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Profitability is expected by respondents to be found between 1 and 3 years (for 46% of respondents) and between 3 to 5 years (41%). Only 13% of respondents consider a longer time perspective with a profitability expected to take more than 5 years.

Expected internal rates of return (IRR) illustrate an annual rate of earnings based on the investment that is mainly situated around 20%, 25% and 30% (at simi- lar levels) by respondents, followed by 100% and 15%

(see Figure 24).

Figure 23: Estimated time before profitability. Source: the authors, 2019

Figure 24: Expected IRR (Internal Rate of Return) – expressed in % (n: 30). Source: the authors, 2019

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While 86% of SME respondents generate revenue of €2.500.000 or less, the other respondents build upon revenue streams ranging between

€2.500.000 and €40.000.000 (2%

generating more than €40.000.000).

Regardless of the area (digital, wood, etc.), SMEs are mainly oriented toward the commercialization of new products and services as well as new markets (including international ones), often linked to innovation-based activities (pre-TRL9). They tend to be rather mature in the development process and their investments – 81% of which are expected to be collaborative – are essentially to be made in the NSPA area with spillovers at country level (FI, NO, SE) for several companies.

Investment needs essentially range between €500.000,00 and

€3.000.000,00 (50% of the total needs put forward by respondents among 42% ranging between €500.000,00

and €1.500.000,00); and the remaining weight of investment needs below

€500.000,00 (29%). SMEs are divided into 3 groups of similar size ready to respectively co-fund 15% or less, 15%- 35% and 36%-80% of the investment sought.

These investments are essentially turned toward a mix of expenditures with a higher weight of Capital Expenditures (CAPEX). Frequent references to investment in equipment and infrastructure are made by

respondents willing to expand their business scale. Such investment would more often be expected at the level of the company itself but also in a joint venture setting. At this stage companies are mainly counting on debt and own funds to finance their investment opportunity, followed by corporate and shareholding investors.

72% of SMEs expect to generate a turnover ranging between €1M and more than €15M (with 24% of respondents expecting a revenue between €5M and €10M) and 13%

more than €15M. 35% of remaining SMEs expect to generate between

€1M and €5M. With the current

distribution of claims, such figure could theoretically lead to a total turnover generation between €181.550.000,00 and €351.000.000,00 (according to SME declarations). Profitability would in that context be reached before 5 years for 87% of SME respondents, with IRR essentially ranging between 20% and 30% according to their claims (which should be considered with great caution).

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W

hen asked if they could face in- vestment opportunities that would require external financing in the future, SMEs mainly answer positively (see Figure 25): 85% declare that there could be one or more such opportunities in the future while only 15% do not (11% of which con- sider this investment as a one-time opportunity, 4% declaring not having any need for external financing).

57% of SMEs invested in some of their pro- jects and 17% in none of them, showing a total of 70% of SMEs not having caught all invest- ment opportunities considered as illustrated by Figure 26.

Respondents having invested either in all or part of their past investment opportunities tended to highlight the dominance of their own funds to finance their effort (this source having been mobilized by 79% of respondents). While debt ranked second (46%), other forms of invest- ments except shareholder investments (26%) and subsidies (21%) fall below the practice of 20% of respondents.

2.4. Investment Needs and Associated Patterns

...

Figure 25: Expected future investments that could require external financing.

Source: the authors, 2019

Figure 26: Did SMEs invest in all (capital) projects considered over the past 3 years?

Source: the authors, 2019

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Having not at all or only partially invested in pre- vious opportunities, respondents highlighted insufficient funds as the key reason for not in- vesting (concerning 57% of respondents) which could very well correlate with the lack of internal resources to manage the project (ranking second with 26%). The third rank (‘Other’) was mainly ticked by SMEs emphasizing the absence of need to invest except for two blank responses. Only 17% of responses pointed to a low IRR or pay- back length.

Figure 27: How SMEs financed prior investment opportunities. Source: the authors, 2019

Figure 28: Reasons not to invest. Source: the authors, 2019

70% of SME respondents did not invest in all opportunities considered in the past and 85% of them declare that there could be one or more such opportunities in the future.

Own funds (mobilized by 79% of

respondents having invested in all or part of past investment opportunities) and debt (46%) were key sources for past investments.

Insufficient funds and the lack of internal resources were key reasons for not

investing (for respectively 57% and 26% of respondents).

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One should observe in Figure 29. that 51% of SME respondents struggle to access finance.

The respondents facing such struggle con- sidered the lack of credit history and/or insuffi- cient financial track record as the main barrier to access finance (33%) as presented in Figure 30.

A variety of factors seems to be included in the

“other” option ranking second in the list (ranging from politics to lack of loan guarantee), while the financial risks and complexity of the project and/

or business model each gathered the selection of 21% of respondents. Market and demand risks as well as operational and technological risks come next, each reaching 17%; while other factors ranged 12% or below.

2.5. Access to capital

...

Figure 29:

“Do you struggle to access finance?”

Source: the authors, 2019

Figure 30: Obstacles hampering respondents’ access to finance.

Source: the authors, 2019

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In their selection, respondents were also asked to rank obstacles from least hampering (1) to most hampering (5). This ranking based only on individ- ual respondents’ selection mainly highlights the weight of project (or business model) complexity as well as the lack of credit history compared to other factors.

Both lists were corroborated by Figure 32, which shows the perspective of respondents who do not particularly consider that they struggle with accessing finance. When identifying pos- sible obstacles to access finance in their region, respondents however highlighted market and demand risks as the major preoccupation (with 61% of companies’ interest) and only positioned complexity second (39%). (Perceived) financial risks and the lack of credit history captured the same amount of clicks (26%) while other factors fell below the 22% reached by cost of financing and unexpected change in customer habits or preferences.

Figure 31: Obstacles – relative assessment.

Source: the authors, 2019

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Figure 32: Obstacles hampering respondents’ access to finance.

Source: the authors, 2019

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SMEs predominantly seek equity (64%) and debt (40%) as displayed in Figure 33. Less than a third of respondents pointed to subsidies (30%) and guarantees (28%) as being at the core of their search for finance.

Figure 34 finds such parallel with the previous figure as it shows that the most attractive finan- cial interlocutor is venture capital (considered rel- evant by 60% of SME respondents), followed by current shareholders of the company (51%) and corporate investors (40%) – with one of the open responses also highlighting the need for the lat- ter. Banks and business angels only gather 34% of SME interests, followed by promotional banks or institutions (30%).

When questioned about the volume of fi- nancing they need, 30% of SME respondents highlight a need for €200.000,00 to €500.000,00 while 28% consider €500.000 to €1.000.000,00.

Together with the 19% of respondents in need of financing ranging between €1.000.000,00 and

€3.000.000,00 it is possible to conclude that the major financing range at stake ranges for 77%

of all respondents between €500.000,00 and

€3.000.000,00.

On the upper end, 9% of respondents con- sider more than €30.000.000,00 and 4% target between €10.000.000,00 and €30.000.000,00.

This adds to 4% of respondents looking for amounts ranging between €3.000.000,00 and

€10.000.000,00, illustrating a relatively high lev- el of demand for financing in ranges higher than

€3.000.000,00 – while only 6% of respondents es- timate their need below €200.000,00.

Figure 33: Type of finance sought Source: the authors, 2019

Figure 34: Financial interlocutor relevant to SME projects Source: the authors, 2019

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The last exhibit (Figure 36) illustrates the impacts claimed by SME respondents as a result of their targeted investment. Expected impacts include job creation (in 83% of cases), raise in turnover (83%), increased profitability (68%) as well as en- vironmental (53%) and social (45%) impacts.

Figure 35: Financing volume needed by respondents. Source: the authors, 2019

Figure 36: Impacts expected from the investment.

Source: the authors, 2019

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While only half (51%) of SME respondents struggle to access finance, the lack of credit history and/

or insufficient financial track record as well as project (or business model) complexity appear to be key barriers to access finance. These are joined by market and demand risks which companies not struggling to access finance also point at as a main hurdle.

In that context, SMEs mainly seek to access (quasi-)equity (64%) and lending (40%) which links to a preference for venture capital (60%) and own shareholder (51%) and corporate (40%) investment.

The dominant financing gap ranges for 77% of all respondents between

€500.000,00 and €3.000.000,00 (with 30% of SMEs seeking between

€200.000 and €500.000 while 28%

rather target between €500.000 and

€1.000.000). A non-negligible share of respondents however target amounts higher than €3.000.000€ (17%) with 9%

of companies declaring expectations of

€30.000.000 or above.

These investments are expected to lead to benefits that are economic in nature such as jobs (83%), turnover (81%), profitability (68%), but also environmental ones (53%).

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