Promoting Availability of Financing to SMEs in Serbia on the Road to EU Integration

Access to finance has been identified as the most important factor that determines the survival and development of Small and Medium-sized Enterprises (SME). Depending on the financing needs, different sources of funding are available to SMEs. However, most of their external financing sources relate to debt. The aim of the chapter is to analyse whether the use of debt as the dominant source of finance for SMEs is economically reasonable in the ruling market circumstances in Serbia or it is necessary to promote alternative sources such as equity capital. The analysis and evaluation of debt and its economic reasonability in terms of maintenance of the real capital value, the inflation rate and the organic composition of assets were conducted on the randomly selected sample of enterprises from the SME sector in Serbia in the 2009-2011 period of time. The sample consists of 30 randomly selected SMEs. Half of the surveyed enterprises are small enterprises, while another half refers to medium-sized enterprises. In addition to examining the possibilities of maintaining debt at acceptable levels, the survival, growth and development of SMEs was perceived through the analysis and evaluation of their ability to maintain the real value of equity. The results of the analysis indicate an increasing tendency among Serbian SMEs to use debt as a source of finance. However, the analysis points out that the growth of debt could not be considered economically reasonable. In light of that basic recommendations for promoting alternative sources of finance i.e. equity capital are provided.