Small and medium-sized enterprises (SMEs), companies with fewer than 500 employees, make up the vast majority of firms (99%) in the U.S. SMEs also employ over half of private sector employees and generate 65% of new private sector jobs.
A recent study by TradeUp analyzes the financial state of SMEs and the impact of the financial crisis on SMEs’ credit and cash flow. On a large scale, financing has improved since the recession, even though traditional avenues for SME funding (bank loans and venture capitalists) have shifted to larger companies. In its place, new channels for capital have emerged, such as angel investors and crowdfunding platforms.
TradeUp’s report underscores these main changes:
- Bank lending has improved, but is not at pre-crisis levels. Loan balances for commercial and industrial loans have decreased $47 billion since June 2008 and are now at a level of $288.7 billion as of June 2013.
- Angel investment has increased. Angels invested $9.7 billion in 2013, a 5% increase from 2007.
- Global crowdfunding is rapidly expanding. In 2012, crowdfunding doubled to $2.7 billion half of which was in North America.
- Expansion and late-stage investment eclipse seed and early-stage investment. Seed and early-stage attracted 46% less than expansion and late-stage, totaling $7.2 billion.
Predicted outcomes for 2014 include expansion of alternative lenders and investors, such as crowdfunding, while bank lending to SMEs is expected to decrease.
For TradeUp’s full report, please click here
Contributed by Haley Goodman.
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