Crisis and Financing – or the Practical Financing Decisions of Hungarian Small and Medium-sized Enterprises

Abstract

The standard operational mechanism of economies was substantially overwritten by the economic crisis of 2008. Due to the relative abundance of resources and the lenient banking practices prior to the crisis that focused on bonuses, there were no barriers to lending, which was possible both in foreign or in the national currency. The financial problems that followed the outbreak of the crisis ended the previous lending practice, and the abundance of resources was replaced by poor liquidity, which – along with the macro-economic predicaments – further complicated the struggle by companies to keep their heads above water. The indebtedness of the private sector, increasing input costs, the tightening of the markets and the decline in consumption caused such difficulties in financing enterprises both at a national and international level that after several years a solution had still not been found for them. The negative effects hit the most those small and medium-sized enterprises that had only limited or no access to the international capital markets. The aim of this present paper is to show the transformation of Hungarian small and medium-sized enterprise financing based on the academic literature and the results of questionnaire-based research, and to highlight the main problems and the reactions to them that point the way to recovery. A further goal of the paper is to present the future path for financing the sector and the factors that will influence this path through an improvement in the tax system or support for credit.