Between Needs and Availability: The External Financing Gap Indicator

This research paper considers the (mis)match between the financing needs of European micro, small and medium enterprises (MSMEs) and the perception of availability of external financing. The paper examines how the gap between the need for finance and the availability of financing instruments (called the financing gap) has changed over time, and how these changes correlate with actual use of external financing. It uses firm-level data for MSMEs in 28 EU countries, which is collected annually by the European Central Bank and the European Commission through the "Survey on Access to Finance for Enterprises" (SAFE).

The question the paper seeks to answer is: how do changes in the perceived need for external financing (and its availability) line up with the patterns of external finance use? It also explores the evolution of the perception of availability of financing and changes in the perceived needs between 2009–2017. The goal of this research is to help policy makers understand the latest trends, and for financial services providers to better understand the drivers of financial product use.