In a world in which financing systems struggle to meet demand, opening the bottleneck in the financing and investment industries is desirable. This will also allow current capital pipelines to function to their full potential.
"The Israeli economy is in fairly good shape," is a frequently heard remark in reference to Israel's business sector. Many people add with the same breath that the economy is resilient in the face of storms. But the consultancy firms for the small and mid-sized business (SMB) sector present a different picture.
The financing challenges facing small and mid-sized businesses may be routine for them, but the challenges have lately been creeping upward to corporations and government companies. In retrospect, this is not very surprising, since market failure does not exist in a vacuum. With regard to financing and investing, it is possible to point to a general problem faced by all Israeli companies, regardless of size or turnover: the difficulty in moving forward and growing when the investment supply is limited, forcing companies to seek financing solutions that do not meet their needs. Nonetheless, the condition of big companies with financing and cash flow problems is frequently better than the condition of small and mid-sized businesses. Big companies still face open doors at the banks and financial institutions. In contrast, small and mid-sized businesses have no ready source of oxygen and in many cases the absence of a diversified investment environment prevents them from progressing and succeeding.
There is no need to elaborate on the condition of the capital market and its inability to meeting financing and credit needs. The drop in trading volumes and struggles at the top between the heads of the Tel Aviv Stock Exchange and the Israel Securities Authority are evidence of the situation. As for the banks, they too are affected by the situation in the industry, and in practice are less available and frequently unable to meet all financing needs, due to burdensome regulation and rules requiring the separation of authority.
It is not too late to open the bottleneck, allow the entry of investors from other channels and to establish mechanisms that will provide good, solid investment options, which can be marketed to investors with "just" six or seven-digit amounts available for investment. Even NIS 50,000-100,000 of capital available for investment is high-quality capital for investment in small businesses seeking quick bridge financing. The entry of new powers into the investment world could result in sustainable macroeconomic change in activity in the economy as a whole in the coming years.
The author is the chairman and CEO of Rubicon Business Group.
Published by Globes [online], Israel business news - www.globes-online.com - on November 12, 2013
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