Fiscal, job-related, financial or administrative problems that Small and Medium Enterprises experience have been the subject of attention by scholars of the Spanish economy, interest is fully justified, since these companies represent about 95% of total, and generate 60% of the jobs, 65% of sales, and contribute about 40% of exports.
However, small and medium businesses are not listed on stock markets, and are unable to raise capital to undertake investments for their sustained growth and as a result, are in a position of inferiority in securing resources. The chances of capitalization of the company are then limited to the systematic retention of profits (self) and the concentration of the assets of the company owners, and as the sole source of external financing in the medium and long term loans and credits are granted by financial institutions and the use of leasing. We shall see that venture capital is then the only option for them.
Ultimately, it may be noted that the financing of productive activity of small and medium businesses face three major problems: the more difficult is access to external financing, the bank increased dependency and the costs of financial resources other than in most companies larger. Neutralizing the effects of these problems requires action in areas not served by the banking system, and especially the strengthening of mutual guarantee schemes and venture capital.
Venture capital is a way to capitalize on small and medium businesses, so that their development is vital for the regeneration of the industrial fabric of the country.
Venture capital funding is an instrument aimed primarily at small and medium enterprises, through which a company specializing in investment or not (investment company) capital injection in a small or medium enterprises (receiving company) in a minority and a relatively short space of time.
If you prefer, we can understand venture capital as a financial formula that provides resources to businesses, mainly small and medium, in the form of permanent long-term funds or with the same risk that funds contributed by the employer as they usually have no warranty or special benefit. It is important to seek the appropriate balance between the percentage of ownership and control of the company and participation in making use of various financial instruments.