EIF Working Paper 2017/044, “Financing Micro Firms in Europe: An Empirical Analysis”, September 2017

The vast majority of firms in Europe are micro firms. This EIF Working Paper investigates the financing patterns of these enterprises. Based on a large European company-level data set, the paper finds that micro firms differ in their financing patterns from small and medium-sized companies. The empirical results show that micro firms are more likely to use internal financing instruments, whereas they are less likely to use state subsidies, trade credit or asset-based financing instruments. Furthermore, micro firms differ from medium-sized firms by using more short-term debt (credit card overdrafts, credit lines and bank overdrafts). The implications of these findings for micro firms and policy makers are discussed.

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