Friday, April 17, 2015

InvestHorizon - adapting to a new financial landscape

Europe’s business community remains heavily reliant on debt-based financing, despite the increasingly incompatible expectations of the main lending source, banks. Meanwhile, alternative, equity-based sources of financing are evolving and new ones emerging across Europe.

New financial ecosystem emerging

Both the European businesses and financial intermediaries face a new financial ecosystem to which they have to adapt.

SMEs should pay greater attention to valuation of their intangible assets such as patents and intellectual property. In their pursuit of finance, SMEs need to prepare thoroughly and search for affordable advice on how to sell their project and how to run a financing process. 

New entrepreneurs must be aware that, especially at an early stage, their risk profile is elevated. That is why rushing into action and undertaking a project too early might prove fatal. Instead, defining a good value proposition, in terms of added services, market competition, building a sense of community etc. might have a more long lasting impact on companies’ survival. In their search for finance, SMEs should expand their scope looking at various forms of financing.

Better skills, greater opportunities 

There is a need to increase opportunity for SMEs to “shop around” from one financial provider to the other, according to their needs, and as the range of financing options seems set to become increasingly fragmented, it is crucial to provide guidance to SMEs on options and offer investment-readiness support via intermediaries.