Mariana Lupan

Innovative Instruments for SME Financing in Romania - a New Proposal with Interesting Implications on Markets and Institutions

Abstract The problem of SME manufacturing financing is already chronic in Romania. The banking system, on the one hand, still fails to sufficiently understanding on these projects, on the innovative character and the work model with intangible assets. On the other hand, the stock market is inaccessible for this type of investments. Investment funds are too focused on liability and indicial management. The government makes efforts to solve the problem of financing SME manufacturing, but there are no tools and no markets or appropriate institutional architecture. In this paper we propose not only new tools based on innovative mix of private management and governmental support of a new type of financial public -private partnership (PPP), but a way that creates a strong support of the markets and changing public perception about investments in capital markets. It first examines the possibility of creating a tool as closed end fund for SME manufacturing, the initial participation of the government will be 50%. It could be attracted foreign Venture Capital Fund (VCF) or Private Equity Fund (PEF) that already exist on the market and are interested in portfolio diversification. This fund can turn into semi-open in the background periodically be admitted new entries private. This fund can turn into semi-open fund in which periodically will be admitted new private entries. The fund may provide loans or, in a further development, may provide venture capital or private equity funding and at least we can start creating a framework for these new tools. Based on this proposal it is also possible to analyze another type of fund focused on co-financing mechanisms dedicated for national and European projects. In this case the main interest is to support liquidity management, consulting, to support warranties or windows settlement for different project phases.