Mind the Gap Essay Example | Topics and Well Written Essays - 2500 words

Mind the Gap - Essay ExampleTable of contents glom 1. Introduction 2. The Small and Medium- size Enterprises 3. Financial crisis on SMEs dandy structure 4. Sovereign debt crisis which affects the banks credit standards, credit margin, and funding conditions 5. Regulatory changes on policies that deal with bank alter activities 6. The Federation of minor Businesses 7. Recommendation 1) Introduction The Small and Medium- sized Enterprises abbreviated as SMEs is defined by the European steering as an enterprise employing not more than 250 employees having an annual turnover of not more than 50m and balance sheet of paper assets of 43m and that has less than 25 per cent of its capital. However, SMEs atomic number 18 defined using three concepts and they include microscopic, local, and unmarried. They are small in nature when considering the number of employees, capital and assets, and turnover. They are also owned by a single owner who could only be the sole employee. SMEs are also local in nature because their markets are usually based on local areas or places of residence (Fielden, 2003). In the European Union, Small and Medium- sized Enterprises faces a number of issues in term of financing. These issues include effects of financial crisis on SMEs capital structure the sovereign debt crisis impacts on banks credit standards, credit margin, and funding conditions and the effects caused by all-inclusive regulatory changes on policies dealing with bank lending activities. However, The Federation of small Businesses abbreviated as FSB, has get down to rescue these SMEs by representing them in the issues for financial market (Ministry of defence, 2013). Its functions revolve around practices dealing with financial lending of the small and medium-sized Enterprises. 2) The Small and Medium- sized Enterprises The SMEs have been recognize as the key contributors of the economy in the European Union, due to the way they have changed the union into a market o riented economy. Currently, statistics shows that 96% of the registered libertines are recognized as small and medium sized firms, with SMEs accounting for approximately 82%. These small businesses actively institute to 25% of the annual Global Domestic Product of the European Union (Villa, 2011). Despite their great contribution, SMEs are faced with financial crisis, cause by various factors hence affecting the capital structure. The financial area within the European Union is characterized by a system based bank where SOCBs or democracy owned commercial banks play an important role. SOCBs provide 78 % of the overall loans in the economy, with half of its credit being channeled into SOEs. This, therefore, makes it difficult for the small and medium size enterprises to access bank loans. 3) Financial crisis on SMEs capital structure However, there are a number of factors which leads to financial crisis that affects the SMEs capital structure. The first one is firm growth. It is suggested that firms growth is relatively negative to its capital structure. A SMEs information asymmetry may demand an extra premium for it to raise external funds, despite the true