ABSTRACT. This paper shows that in two important sectors
of Swedish industry in the early 1990s the existence of
demand (internally generated) constraints in addition
to the familiar finance supply (externally generated) con-
straints on businesses are a significant empirical phenomenon.
Firms are aware that relinquishing some control would
improve performance. However, the returns in growth, profits
and survival are not sufficient to offset the utility of control
loss. Owners of younger firms, especially in Business
Services, regard very favourably the added expertise of new
(preferably angel) equity holders, with one in three such firms
having actively sought new owners. Equity finance is there-
fore to be regarded as a ‘package’ from the viewpoint of the
smaller firm, with transfer of management skills from venture
capitalist to firm sweetening the bitter pill of control-loss.
Recent years have seen a debate in Sweden over
risk capital provision for SMEs, together with the
financial conditions in which they operate. A
concern for government has been the extent to
which the requirements for equity and loan capital
are met by the Swedish financial community, and
the extent to which business financial conditions
provide the basis for a competitive Swedish
industry. Against this background, interest has
focused on the provision of risk capital (primarily
equity) to SMEs. Questions of importance here
are: Do SMEs have a desire to increase the equity
of their businesses? If so, has it been possible for
the financial community to meet their needs? If
not, are there market/institutional deficiencies that
can be remedied by intervention?
Historically in Sweden interest has focused on
the financing of the Manufacturing sector, not least
because of its importance for Swedish exports.
Over the last decade or so, however, the growth
of professional/business services has changed this
focus – for example, new technology-based firms
(NTBFs) are now recognised as assuming a special
role in the renewal of Manufacturing industry.
although small hi-tech consultancy services or
software firms are considered to have the greatest
economic potential, they now seem to be experi-
encing difficulties in obtaining finance on the risk
capital or loan markets. Given this background,
both Manufacturing and Business Services firms
were considered central to the study.
2. Aims of the study
It is natural to ask of course whether there are
differences between the Manufacturing and
Business Services sectors in terms of the desire
for, as well as access to, relevant finance – con-
trolling for the size and other relevant dimensions
of the firms. We should expect such differences
both to exist and to be important, and this question
will be addressed at an early stage in the analysis.
However, a more central aim of this study is to
describe and analyse SMEs’ perceptions of the
financial climate in Sweden in conjunction
sectoral characteristics, finance usage and
economic performance. Armed with this data we
are then in a position to ascertain the extent to
which the needs of SMEs are being met and
to assess the role and importance of different
The Financial Conditions
for Swedish SMEs:
Survey and Research Agenda
Small Business Economics 9: 179–194, 1997.
1997 Kluwer Academic Publishers. Printed in the Netherlands.
Final version accepted on November 13, 1996
CSME, Warwick Business School
Swedish University of Agricultural Sciences