Funding growth and innovation in Austria – financing conditions for SMEs and start-ups

In Austria, like in most European countries, small and medium-sized enterprises (SMEs) rely on bank funding as their primary source of external finance. Using ECB survey data, we analyze the availability of bank credit for SMEs in Austria in comparison to SMEs in the euro area. Overall, we find that bank lending has been rather stable over the past few years, and the lending conditions did not discourage many potential borrowers. Creditors and investors treat small, young firms that engage in innovation differently due to their elevated risk profile and the high share of intangible capital in their assets. We discuss the financial life cycle of these start-ups and the appropriate funding in each stage, including policy actions that have been taken to encourage a favorable ecosystem for start-ups in Austria. Whereas public support for these firms is well established, the private market for venture capital is rather small in Austria, especially in comparison with European innovation leaders.