Too Little or Too Much Credit: Small Business Indebtedness in the EU

MFC Policy Paper No. 4 reviews the potential reasons for small business indebtedness and proposes action steps to develop better understanding of the size and scale of this phenomenon in the EU. Access to finance for SMEs draws a lot of policy attention based on the premise that small businesses face credit constraints more than larger firms.  While this may be true for some types of SMEs, it is also true that SMEs over-borrow and over-invest which may lead to business closures and bankruptcies. So far this aspect of SME borrowing has attracted little attention.