Why a more accurate EU definition of SMEs matters!

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As part of the European Union’s commitment to deliver greater access to finance for small- and medium-sized enterprises (SMEs), EU policy-makers will have to deal with a fragmented market landscape and responses by individual member states to address failures. On the basis of some early evidence, this Commentary calls for a rethinking on the part of the EU of its definition of an SME, which currently does not take into account the internal market dimension.

A more accurate definition, reflecting the internal market and the stages of evolution of a firm and its financing needs, would allow better benchmarking and a comparison of policy responses that often claim to address market failures in SME finance.