Whilst big business often grabs the headlines, one thing is true the world over: no economy succeeds without a thriving small business sector. Micro and small businesses (MSEs) are arguably the backbone of any economy. They contribute to job creation, economic growth, and innovation. They also create the local shopping centers and meeting points that not only support a more prosperous economy, but also contribute to healthier local communities.
In November 2022, Strive Czechia, a $5.5 million new initiative supported by the Mastercard Center for Inclusive Growth launched, bolstering the digital and financial resilience of 250,000 small businesses – particularly female business owners and those from minority ethnic backgrounds. We collaborated on the Barometer in 2022, and then again in 2023 – this latest report is the third edition which delves deeper into how MSEs access, use, and think about finance.
Around 40% of entrepreneurs don’t feel that an external loan is suitable for them, and over a third of entrepreneurs report a preference to remain debt- free. This corroborates existing research showing that 40% of Czechs would not consider taking out a loan for their businesses, a figure that rises to 67% among those aged 55 and above.
2. This wariness translates into only a few MSEs attempting to access external finance, and might be exacerbated by challenges in the application process.
Only a quarter of entrepreneurs have attempted to access private financing, and those that do report significant barriers, ranging from prohibitive interest rates (27%) to issues with the loan size offered (24%), and stringent collateral requirements (22%).
3. Successful applications are not the end of the story, with an alarming nine in ten entrepreneurs who have taken a loan viewing it as a burden.
Men are more likely to see the loan as a burden than women (18% vs 10%), as are older entrepreneurs’ (24% of those below 34, vs 42% of those 35–54 and 32% above 55 years). Nearly 1 in 5 explicitly regret taking the loan, and close to a third of entrepreneurs report taking an additional loan to help with existing business loan payments.
4. A lack of awareness of sources for financing might be contributing to the wariness of external finance.
1 in 5 Czech MSE entrepreneurs rate their awareness of bank loans as poor, and 2 in 5 rate their awareness of government sources of capital as poor. Education levels and age also play a role in the types of financing entrepreneurs are aware of, for example, 47% of entrepreneurs with less than a high school diploma report poor awareness of bank loans, in contrast to only 16% of those with a high school diploma or more.
5. State support is a similar story, showing poor awareness and low uptake across entrepreneurs.
Close to 40% of entrepreneurs report poor awareness of government financial support, and only 30% report attempting to access such support in the past three years. Challenges on the government side of things include complex application procedures (38%), strict eligibility criteria (35%), and extended approval timelines (33%).
