Traditional debt finance and alternative financing instruments for SMEs

This chapter provides the rationale for the study and illustrates the objective and structure of the report. It describes traditional lending technologies and related credit-risk mitigation techniques. It comments on their limitations for financing young and small firms and for sustaining long-term investment and growth. It discusses how financing instruments alternative to straight debt alter the traditional risk-sharing mechanism and proposes a categorization of these instruments across the risk/return spectrum, i.e. by differing degrees of risk and return.