MFC Policy Paper No. 4: Too Little or Too Much Credit: Small Business Indebtedness in the EU, 2015

The paper reviews the potential reasons for small business indebtedness and proposes action steps to develop better understanding of the size and scale of this phenomenon in the EU. Access to finance for small businesses draws a lot of policy attention based on the premise that small businesses face credit constraints more than larger firms. While this may be true for some types of small businesses, it is also true that small businesses over-borrow and over-invest which may lead to business closures and bankruptcies. So far this aspect of small business borrowing has attracted little attention.