Small firms go it alone, pay price

The country’s small and medium-sized enterprises are going at it alone when it comes to financing their business, snubbing banks and preferring suppliers for credit, according to research conducted on the sector. But a study completed by research company Hellastat showed consumers are ultimately stuck with the bill, since smaller businesses borrow from more expensive finance sources and pass costs on to customers. «Of course, it is justifiable for small and medium-sized businesses to resort to operational lending from suppliers where procedures are less formal and they rely on experience,» Hellastat said. «They steer away from bank lending which requires, among other things, a particular business plan and reliable financial information.» The study, conducted on 27,000 businesses between 2002 and 2004, also found that banks usually only lend to larger firms. Lenders say weak growth rates, low profits and shrinking turnover have led to this policy. Healthy repayment rates contradict this argument; small and medium- sized firms are better than large ones at paying back loans. Also, businesses relying on means other than banks for credit increase foreign exchange risks and the number of bounced checks in the market. Another reason lending from finance companies remains low is that small-business owners are still conservative about meeting financing needs, the report stated.

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