The Impact of COVID-19 on SME Financing

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(CC) Jernej Furman/FlickrThe OECD has just published the report “The impact of COVID-19 on SME financing: A special edition of the OECD Financing SMEs and Entrepreneurs Scoreboard.

The COVID-19 crisis has had a profound impact on SME access to finance. In particular, the sudden drop in revenues created acute liquidity shortages, threatening the survival of many viable businesses. The report documents an increase in demand for bank lending in the first half of 2020, and a steady supply of credit thanks to government interventions. On the other hand, other sources of finance declined, in particular early-stage equity.

This paper, a special edition of Financing SMEs and Entrepreneurs, focuses on the impacts of COVID-19 on SME access to finance, along with government policy responses. It reveals that the pre- crisis financing environment was broadly favourable for SMEs and entrepreneurs, who benefited from low interest rates, loose credit standards and an increasingly diverse offer of financing instruments.

It documents the unprecedented scope and scale of the policy responses undertaken by governments world-wide, and details their key characteristics, and outlines the principal issues and policy challenges for the next phases of the pandemic, such as the over-indebtedness of SMEs and the need to continue to foster a diverse range of financing instruments for SMEs.

The report is available from the OECD website.