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Capital can pay for a growth plan, but it cannot decide what to build, reach customers, manage cash flow or use new technology well. Micro, small and medium-sized enterprises (MSMEs) are more likely to make productive use of finance when their owners and workers have the capabilities to plan and execute the investment—and when the financing fits the firm’s stage, cash flow and local conditions.
Why capital and capability have to work together
A loan, investment or equipment lease can remove a constraint, but funding alone does not ensure that a business will grow. A firm also needs to identify a viable opportunity, estimate costs and demand, put the money to work, and manage the resulting obligations. Those tasks depend on management, financial and workforce capabilities as well as the conditions in the firm’s market.
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The International Labour Organization describes MSMEs as central to decent work, economic growth and social justice. Its joint work with the OECD identifies management and workforce skills, business digitalisation, formalisation and social protection among factors relevant to MSME productivity. Which constraint matters most varies by sector and local context; there is no single training or financing solution for every firm.
What the latest cross-country finance figures show
The OECD’s 2026 Scoreboard provides official SME financing data for 48 countries. Its core indicators cover 2007–2024, with the latest available data for 2025; the figures below refer specifically to 2024 and describe scoreboard medians or country counts, not every country or individual business.
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- Median new SME lending increased 5.7% in 2024, but remained 4% below its 2022 level.
- The stock of SME loans as a share of GDP fell in 25 of the 41 countries with data for that measure. Long-term lending also edged down.
- Median factoring activity fell 3% in 2024, while leasing increased 1.6%. The equity rebound was uneven.
These mixed movements do not establish whether finance is available or affordable to a particular firm. They do show why “more capital” is too broad a goal: the relevant question is whether an appropriate source is accessible on workable terms. The OECD notes that firms’ financing needs change over their life cycle and identifies reliance on bank finance, information asymmetries, high transaction costs, and gaps in financial skills and knowledge as continuing challenges. Its SME and Entrepreneurship Financing overview explains this broader financing context.
Match financing to the business need
Debt, equity, factoring and leasing are not interchangeable. The table is a decision aid, not a claim that any instrument is available or suitable in every country. Exact costs, eligibility, collateral, speed and regulatory requirements depend on the provider, offer and jurisdiction; confirm them locally before committing.
| Financing route | Question about purpose and stage | Terms and cash-flow checks | Access and execution checks |
|---|---|---|---|
| Debt, including bank loans | Is there a defined use for borrowed funds, such as working capital or an investment, and is borrowing appropriate for this firm’s stage? | Compare total cost, repayment schedule and whether forecast cash flow can support payments under weaker-than-expected sales. | Check collateral, eligibility, documentation, approval time and transaction burden. Bank reliance and information gaps can make access difficult for smaller firms. |
| Equity | Would sharing ownership suit the business’s development needs and the owner’s objectives? | Understand dilution, governance and investor expectations; unlike a loan, equity does not have the same scheduled debt repayments. | Assess investor availability, the process of finding a match and the time required. Availability and rules vary by market. |
| Factoring | Could financing against receivables address a timing gap between invoicing and customer payment? | Compare fees and the effect of customer payment delays or disputes on the arrangement. | Check which invoices and customers qualify, documentation, processing time and local regulation. OECD scoreboard median factoring activity fell 3% in 2024. |
| Leasing | Is the need for use of an asset rather than unrestricted funds for a broader purpose? | Compare the full payment schedule, end-of-term conditions and fit with the asset’s useful life and expected revenue. | Check asset and business eligibility, delivery timing, obligations if cash flow falls, and local rules. OECD scoreboard median leasing increased 1.6% in 2024. |
For any offer, compare the six essentials: purpose and business stage; total cost and repayment or dilution terms; collateral and eligibility; speed and administrative burden; risk and cash-flow fit; and availability and regulation in the firm’s country. The OECD’s SME financing, business conditions and growth topic page provides additional context on how financing relates to business conditions.
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Skill development should respond to the constraint holding the business back, rather than defaulting to training as a general remedy. The ILO and OECD’s 2022 report on MSME productivity, inclusive growth and decent work creation places capabilities alongside the wider conditions that shape productivity.
- Management: planning, setting priorities, tracking costs and assessing whether an investment is producing the intended result.
- Financial capability: preparing usable records and forecasts, understanding financing terms, and judging whether repayments fit expected cash flow. This can also help a firm communicate its needs to a potential provider.
- Workforce capability: ensuring employees can perform the work required by a new product, process or expansion, with training matched to actual tasks.
- Digital capability: selecting and using technology that supports operations, customer access or record-keeping, rather than adopting tools without a defined business need.
Training cannot compensate for every barrier. Weak demand, infrastructure constraints, regulation or limited local finance may remain decisive, and the relevant mix differs across sectors and places.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What evidence says about finance and job growth
A 2016 World Bank summary of firm-level research reported that firms with loans had 1–3 percentage points higher employment growth overall across two databases; among MSMEs, the reported difference was 1–4 percentage points. The study also examined credit-bureau introductions as a source of variation in credit supply. These are study estimates, not a guarantee that a loan will cause a particular firm to add jobs or grow: outcomes depend on how finance is used and on business and market conditions.
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The World Bank Group’s Jobs FAQ: MSMEs and Entrepreneurship estimates that 70% of MSMEs in developing economies lack access to financing. The page does not make clear the estimate’s underlying reference year, so it should be read as a broad, dated-unclear estimate rather than a current, country-specific rate.
Quick Recap
A practical check before seeking funding or training
- Name the binding constraint. Is growth limited by working capital, equipment, skills, customer demand, technology or another operating condition?
- Define the investment. Specify what funding would pay for, what capability employees or managers need, and what result would indicate progress.
- Test the cash-flow case. For debt or other payment obligations, assess whether the business can meet them if sales arrive late or fall short of forecast.
- Compare actual local options. Verify provider eligibility, total cost, collateral, terms, timing and applicable regulation for the firm’s country and circumstances.
- Plan implementation. Identify who will use the funds or new skills, how the change will be managed, and how the firm will monitor results.
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