Strengthening SME Financing in Spain: New Strategies for Growth and Innovation

Spain is intensifying its efforts to enhance access to financing for small and medium-sized enterprises (SMEs), which form the backbone of the nation’s economy by comprising over 99% of all businesses and driving significant employment and value creation. Recent improvements in the financial health of Spanish firms have reduced their vulnerability, but a cautious approach to debt has also led to lower investment and growth potential, creating a need for carefully balanced financing strategies.

Currently, bank lending remains the primary external funding source for SMEs in Spain, but its relative importance has declined since the financial crisis, particularly for microenterprises that increasingly rely on self-financing. Notably, this drop in borrowing is attributed to lower demand rather than restrictive lending conditions, as the availability of credit has improved significantly. However, certain segments, such as newer firms or microenterprises without a history of bank debt, continue to face barriers due to insufficient financial information and administrative costs, which are exacerbated in periods of uncertainty.

To address these challenges, two key initiatives are being promoted. First, the expansion of independent ratings through tools like the in-house credit assessment system (ICAS) aims to create standardized, transparent measures of creditworthiness. These ratings can enhance SMEs’ bargaining power, access to public funding, and visibility among investors while closing information gaps. Second, loan securitisation—a method that turns credit portfolios into liquidity and reallocates risk—holds significant promise but remains underutilized in Spain, especially compared to the broader euro area and the United States. New proposals to revise European regulations and develop a pan-European securitisation platform could unlock greater funding potential and make these tools more accessible to Spanish SMEs.

Beyond traditional bank lending, the diversification of funding sources is essential for SME resilience and adaptability. Venture capital, in particular, is instrumental for startups and high-growth companies, fostering innovation and job creation. Evidence shows that businesses backed by venture capital not only grow faster but also find it easier to obtain bank loans, as investors’ due diligence helps reduce information asymmetry. Despite these advantages, venture capital investment in Spain still lags behind the European and US averages, indicating room for expansion.

To drive these reforms, Spain is launching a High-Level Task Force on SME Financing and advancing a European securitisation platform, bringing together public institutions, business associations, and representatives from the banking and financial sectors. This group will assess current financing conditions for SMEs and propose concrete measures to stimulate a more dynamic and diverse financial ecosystem.

This renewed focus on SME financing is a pivotal step for Spain, aiming to foster sustainable growth, enhance economic resilience, and ensure that innovative businesses can fully realize their potential in a changing financial landscape.