ViaVoice study - New trends in financing

A word from Florence Vasilescu, CEO of FirmFunding

"A year ago, we decided to commission a study on business financing, and more specifically on the perception that SME managers might have of bonds financing. It emerged that bonds financing, a financing solution that is unavoidable for large groups, was still too little known and used by SMEs.

This year, it is the advice of these business leaders that we wanted to interview, specialists in financing matters, who, together with the chartered accountants, provide essential technical and financial support to SME managers. We felt it was important to find out, for 2019, what trends were emerging in financing methods and their expert opinion on them.

That the 135 members of the first professional association bringing them together, AFiTE (Association pour le financement et la transmission des entreprises) be thanked for agreeing to respond to this study, conducted by our partner ViaVoice.

A positive general feeling, first of all: According to the vast majority of the top boards (3/4 of the boards surveyed), their SME clients have found a financing solution when they needed it. This is to be welcomed.

What type of financing have SMEs benefited from ? Unsurprisingly, bank financing is the most common type of financing for all types of SMEs (+ or - €5 million in turnover). An interesting finding of the study is that, according to the advisors questioned, bonds financing confirms its breakthrough in sources of financing for SMEs: in 37% of cases, they indicate that they have put together financing dossiers consisting exclusively or partly of bonds. As the Viavoice experts analyse, however, a dividing line emerges within SMEs, depending on their size: those with a turnover of more than €5 million are far more profitable than those with a more modest turnover, which is not surprising given the criteria governing the choices of professional investors.

It's a source of satisfaction: The trend, which was only recently observed among large groups, is spreading to the world of SMEs, which can increasingly find a solution to finance their growth or their transfer, in addition to banking !

Another interesting point of the study is the reasons why bonds financing was not, in some cases, favoured: 3 explanations were given, financing that is too expensive, unsuitable and on which there is not enough information. Each of these obstacles can be removed:

• -   if the cost of bonds financing is indeed higher than bank financing, remember that it finances projects that cannot be financed by banks and remains cheaper than equity, while preserving the founders' share of capital;
• -   Bonds financing is, contrary to what was indicated by the interviewed councils, very suitable for development and transfer projects of SMEs of a certain size: this response (which is in line with the third obstacle, linked to the lack of information) reflects the need to continue to inform and convince financing players of the usefulness of private debt financing to enable the growth of SMEs. FirmFunding does this every day !

Finally, an important clarification: This study was carried out in March 2020, and covers the year 2019, prior to the Covid crisis and its consequences. Since then, SMEs have had to deal with the exceptional consequences of containment on their activity, helped by public policies and, in particular, the EMP system. There is a good chance that bonds financing will more than ever be a credible solution for SMEs in the future, in a context where the banking sector, especially after the EMP campaigns, cannot do everything! The activity of the FirmFunding platform confirms the good performance of bonds financing in the current context. 80 million euros of financing have been put online since the beginning of the year and files are closed every month.

FirmFunding is delighted to support SMEs, their advisers and investors in order to enable the financing of growth and development in a different way. Enjoy reading !"