Firms still assessing their access to financing positively
Firms have reported a growing need for financing in recent years, but at the same time their access to financing has not kept pace. The finance gap (the gap between financial needs and access to financing) widened slightly, according to Bank of Slovenia research. Access to financing nevertheless remains one of the least significant limiting factors for firms. A shortage of qualified labour and experienced managers was again highlighted as the most significant limiting factor last year. This issue is being reported by more and more firms each year, which the Bank of Slovenia attributes to demographic changes in the labour market. Firms are still reporting that, similarly to previous years, they will continue financing their planned investments mostly with internal resources, or certain bank resources.
The Bank of Slovenia has been conducting surveys of firms’ access to financing since 2011. The survey aims to find out their reading of the market situation for financing, thus supplementing the information that we obtain from banks. The 2019 survey was conducted in November, and thus the answers from firms do not take account of the current situation or risks in the economy.
First, we should say that more than half of the firms cited the limited availability of qualified labour and experienced managers as the most significant limiting factor. This was followed by production costs and labour costs, regulations, domestic demand and competition. As in recent years, access to financing remains one of the least significant limiting factors. The Bank of Slovenia finds no significant difference between the results from large enterprises and those from SMEs.
The survey then focused on firms’ financial resources and their access to them. We find that firms in Slovenia are mostly financing themselves from internal resources, including retained earnings and asset sales, and from bank resources (loans and current account overdrafts). Leasing and factoring also remain significant sources of financing. Almost a third of the funds obtained by firms are being earmarked for investment and current operations.
Firms have reported a growing need for financing in recent years, particularly bank resources and leasing. They are also reporting improved access to all sources of financing, but this improvement is smaller than in previous years. The finance gap (the gap between financial needs and access to financing) consequently widened slightly for the main sources of financing.
Figure: Finance gap* by source of financing
Source: Bank of Slovenia Note: *Gap between financial needs and access to financing.
In 2019 it was primarily large enterprises that raised their number of applications for all sources of financing, most notably for bank loans and factoring. The number of applications for all sources of financing by SMEs remained unchanged. SMEs were less successful in obtaining financing from their submitted applications, and saw a rise in the share of their applications rejected. Large enterprises were more successful than SMEs in 2019, as they mostly obtained all of the requested funds.
This year again more firms are expecting an improvement in access to financing than a deterioration, although the share has been declining since 2017.
According to last year’s survey, which as stated earlier does not take account of the current situation and risks in the economy, the vast majority of firms are planning investments over the coming years. They are investing most heavily in machinery and equipment, real estate, and expansion of turnover. Similarly to last year, the majority intend to finance the planned investment with internal resources and bank loans.