Examination of financing opportunities for SMEs in Hungary (market-rate loans versus state-supported loans)

Abstract

Statistical data indicate that the SME sector represents a substantial and economically significant segment; however, these companies demonstrate efficiency levels that remain considerably lower than those of large, typically multinational corporations, suggesting significant potential for further development and growth. Experts generally acknowledge the considerable growth potential of this sector. The comparatively lower performance of SMEs may be attributed to several factors, such as financing difficulties, low levels of innovation, and a lack of automation, digitalisation, and the application of marketing and management methods. The article provides a comprehensive overview of financing sources available to SMEs. The financing of micro, small and medium-sized enterprises in Hungary remains one of the most important issues in economic policy and the financial system. Despite the increasing availability of bank-based and state-supported financing schemes over the past decade, a certain degree of information asymmetry and uncertainty still exists among SME sector participants regarding the functioning of these instruments. Many business leaders are not fully aware of the conditions under which, for what purposes, and at what stage of the business lifecycle different loan programmes should be utilised, or to what extent market-based bank loans and state-supported schemes may contribute to their development. The study examines financing opportunities available to companies operating within the SME sector, with particular emphasis on market-rate bank financing and state-supported loan programmes, as access to these financing sources plays an important role in supporting business growth. A qualitative research approach was used in order to gain a deeper understanding of business leaders’ opinions, experiences and decision-making mechanisms. Sixteen interviews with business leaders were conducted. The analysis included sixteen micro, small and medium-sized enterprises from the Northern Great Plain region, operating in various industries. The companies were selected using purposive sampling, taking into account differences in financing background, area of activity and development objectives. The primary aim of the study was to identify the factors influencing borrowing decisions and to examine how external financing affects financial performance and business growth. One of the key findings of the research is that the majority of SMEs continue to respond reactively to financial challenges: raising funds is often perceived  as a forced solution, rather than a conscious strategic decision. This may be explained by insufficient financial knowledge, administrative complexity and the unpredictability of tender systems. In contrast, the literature considers financing decisions to be a key factor in the long-term competitiveness of enterprises. One of the main conclusions of the study is that financing instruments can contribute to growth only if the financial awareness and strategic planning of enterprises also improve.