Participative loans as an alternative policy instrument for promoting SMEs' growth

Resumen

We study sales and employment growth of companies that receive a government-sponsoredparticipative loan (PL), a hybrid form of financing between debt and equity. We analyze a sample of 512 firmsthat received a PL from a Spanish government agency between 2005 and 2011. Using both propensity-scoreand panel-data estimation, we find evidence that PLs significantly boost the growth of sales and employees ofbeneficiaries. In the two years after the grant, a 1 million Euro PL loan generates between 1.1 and 1.9 millionEuro in additional sales and between 12.1 and 14.8 additional jobs. The effect on growth is significant andstable, and PLs add 16.2% to annual sales growth and 9.8% to employment growth to beneficiaries. The effectof PLs on growth is larger than what indicated by the literature for both government-sponsored debt(guaranteed loans) and equity (governmental venture capital) programs