capital is a relatively new, but growing, form of
financing that goes beyond prevailing practices in
the banking system of Greece and neighboring countries.
A number of factors are leading to an increase in
demand for venture capital:
High interest rates: Average interest rates are more
than 4-5 percentage points above the inflation rate,
a spread lower than in the past but still significant
in an intensively competitive economy.
High management costs of loans.
Strict collateral requirements by Banks for providing
loan capital are a serious impediment, particularly
to developing and small to medium-sized enterprises
lacking fixed assets.
Limited available bank capital due to coverage of
fiscal needs and deficits, use of large capital sums
for major projects, etc.
Companies/ need to share risk.
Effective contribution of venture capital funds to
their portfolio companies due to substantive participation
in management; significant added value of a strategic
investor (such as a VC fund), particularly in firms
aspiring to go public.
VC funding –as opposed to debt financing- allows companies
much better control of their leverage (debt/equity
ratio). It allows them to invest in development and
modernization without increasing financing risk due
to excessive borrowing.