When the global economy says that the European economy is growing and is out of the recession I have several doubts on the same. SME segment of any economy is the backbone and real growth of an economy comes when this segment grows. But with the financial meltdown of 2010-2012 the situation of this segment is critical in term of getting funds from the Banks. In my research I find that as India plans for a GDP growth of 8% above over the next 3 years and plans to bring down the fiscal deficit I find there is a substantial opportunity to entering into JV with Euro zone SME segment to enhance and strengthen the lucrative business opportunities of the Euro Zone. Even after capitalizing banks this segment is still struggling to get credit and this place where private equity and all other alternative source of capital come into play. SMEs in Euro-zone account for two-thirds of employment across Europe and their health is central to the region’s development of economic growth. But the higher cost of credit and the contraction of its availability are reducing the growth prospects.

A quick look at the Bank rejection and opportunity ahead:
·         In total about one third of the SMEs surveyed did not manage to get the full bank loan financing they had planned for during 2013.

·         13% of their loan applications were rejected and 16% of companies received less than they applied for.

·         The highest rejection rate was among micro companies employing fewer than 10 people (18%) and among SMEs which had been active for less than 2 years (28%).

·         In comparison, only 3% of loan applications from large enterprises (those with 250 or more employees) were rejected problem by 40% of SMEs in Cyprus, 32% in Greece, 23% in Spain and Croatia, 22% in Slovenia, 20% in Ireland, Italy and the Netherlands, compared with 7% in Austria, 8% in Germany or 9% in Poland.

·         Rejection rates for loan applications were also highest in Greece and the Netherlands (31%), followed by Lithuania (24%). Ireland (16%), Greece and Cyprus (15%).

·         Half of the loans obtained in the last two years were for less than € 100 000. SMEs are still strongly dependent on bank financing. 85% of loans in the past two years were provided by banks.

·         SMEs perceived difficulty to access to finance differently from 40% of SMEs in Cyprus, 32% in Greece, 23% in Spain and Croatia, 22% in Slovenia, 20% in Ireland, Italy and the Netherlands to just 7% in Austria or 8% in Germany and 9% in Poland.

·         Now as banks are rejecting the credit off take private segment finds a substantial opportunity.

·         Equity financing was more likely among larger SMEs (rising from 4% among those with only 1-9 employees to 7.5% among those with 50-249 employees).

·         Those with the highest revenue levels (11% for SMEs with more than euro 50 million). It was also more likely among SMEs that have been established for at least 10 years (9%) and SMEs in the trade sector (15%).

·         Not surprisingly it was most common among SMEs partly owned by venture capital or business angels (21%).

Now the biggest problem for these companies to get is that they are not getting clients for their business and this problem is increasing day by day. Stringent austerity measures in their own economy has resulted significant drop in consumption and lack of opportunity. Hence it’s a huge opportunity for the consultants in India to get these SME good platforms in India in term of clients in the form of JV and partnership and also getting them capital. Currently India is going to be in the path of significant roller coaster ride of GDP growth hence expansion and development of the business across all industries is the demand of the future. So help out these SME’s and develop strong business opportunity for India as well as for the European SME. The graphic chart shows the trend of problems being faced by the European SME and the opportunity in those areas. On the other hand if you observe you will find that there is a substantial growth in other external financing and subsequent growth in the Bank but banks are unable to full fill the business opportunities. The proportion of SMEs in the EU applying for bank loans or trade credit in 2013 was similar to 2011 levels, but application levels for other external financing has risen from 10% in 2011 to 14% in 2013.Small and medium-sized businesses in the peripheral euro-zone are being “starved” of credit, paying interest rates on bank loans up to three times higher than German SMEs.

In my research I find that SMEs fund requirement in the form of fixed investment and inventory and working capital as the main source of their increased financial needs, while the opposite was true for Germany. At the same time, euro area SMEs also reported, on balance, a somewhat higher need for external financing resulting from insufficient availability of internal funds (5%, up from 3%). At country level, the highest net percentages of SMEs reporting an increase in their need for bank loans were again recorded in Greece (30%) and – to a much lesser extent – Italy (14%) and France (12%). Hence it’s well clear that India has got substantial business opportunities to get Euro zone business to form JV in India and develop and market products. Price negotiation and competitive business opportunities are the key trigger for entering into JV based upon the current situation.