Innovative Financing Tools for SMEs

Dear Colleagues,

In recent years, the socio-economic events affecting major global economies have led companies to rethink their fundamental functions. Capitalization and supervisory capital constraints have inevitably triggered a natural selection mechanism, whereby banks tend to provide liquidity only to a limited group of corporate customers. This mechanism favors well-capitalized organizations and disadvantages those that traditionally rely on banks as their primary financial partner, such as small and medium-sized enterprises (SMEs).

Undercapitalization and dependence on bank credit are now among the main causes of SME failure. The financial challenges they face significantly contribute to their progressive exclusion from the market.

Rethinking the mechanisms for meeting financial needs has thus become a necessary condition for the survival of these small economic actors. The first step in this rethinking process involves the creation of an alternative capital market which is capable of reducing SMEs’ dependency on traditional bank financing. Since 2012, Europe has embarked on a path of transformation aimed, on the one hand, at introducing and regulating new alternative financing instruments and, on the other, at promoting corporate growth through innovation and the adoption of new technologies.

These new financing tools can be broadly classified into debt-based and equity-based instruments. The former, mainly including mini-bonds, lending crowdfunding, and invoice trading, aim to provide capital that must be repaid by the company directly to the market according to traditional debt rules and by paying a predetermined periodic interest to lenders. The latter, such as equity crowdfunding, initial coin offerings (ICOs), and stock market listings, seek to attract funding by issuing shares of capital directly to the public. In this case, investors share in the company’s business risk and are rewarded through future profit distribution.

Within this evolving landscape, the European Union has adopted a series of measures to promote the use of such instruments by SMEs. One notable example is EU Regulation 2020/1503, which harmonizes equity crowdfunding rules across Member States, enables equity crowdfunding platforms to also deal in mini-bonds, reflecting growing SME familiarity with these tools, and encourages convergence among key actors such as investors, business angels, and venture capitalists.

At the same time, MiFID regulations provide important limitations to platforms in order to curb opportunistic behavior and safeguard transparency in the markets.

This complex and dynamic scenario is discussed in this Special Issue, with the aim to shed light on the several actors involved in innovative financing processes and to explore under-researched or emerging topics. Contributions should reflect strong originality and seek to support academics, professionals, and entrepreneurs as they navigate the still-uncertain landscape of equity- and debt-side innovative financing tools. The related manuscripts will contribute meaningfully to the field of entrepreneurship while also offering critical perspectives on accounting and finance.

In this Special Issue, original research articles and reviews are welcome. Research areas may include (but are not limited to) the following:

• Fintech innovation in small business financing;
• Innovative equity- and debt-side financing tools for SMEs;
• Innovative financing strategies and decision-making processes in SMEs;
• Governance and financing: tools to attract capital without losing control;
• Specific aspects such as sustainability, soft skills, and gender in the context of innovative financing tools;
• The role of financial intermediaries in risk management and financing performance;
• The role of investors in risk management and financing performance;
• Models and tools for fraud risk prevention;
• Models and tools for SME rating in innovative financing processes;
• Comparative studies on small business financing across different countries;
• Cross-country comparisons of innovative financing systems for small enterprises under multiple regulatory frameworks.

I look forward to receiving your contributions.

Dr. Giuseppe Modaffari
Guest Editor

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• SMEs
• innovative financing
• fintech
• strategy
• fraud risk
• equity
• debt
• decision-making