The Financial Conditions for Swedish SMEs: Survey and Research Agenda

Abstract

This paper shows that in two important sectors of Swedish industry in the early 1990s the existence of finance demand (internally generated) constraints in addition to the familiar finance supply (externally generated) constraints on businesses are a significant empirical phenomenon. Firms are aware that relinquishing some control would improve performance. However, the returns in growth, profits and survival are not sufficient to offset the utility of control loss. Owners of younger firms, especially in Business Services, regard very favourably the added expertise of new (preferably angel) equity holders, with one in three such firms having actively sought new owners. Equity finance is therefore to be regarded as a ‘package’ from the viewpoint of the smaller firm, with transfer of management skills from venture capitalist to firm sweetening the bitter pill of control-loss.