small and medium enterprises

{{expand section|date=January 2017}}

SMEs are important for economic and social reasons, given the sector's role in employment. Due to their size, SMEs are heavily influenced by their Chief Executive Officer (CEOs) or managing director. The CEOs of SMEs are often the founders, owners, and managers of the SMEs. The duties of the CEO in a SME mirror those of the CEO of a large company: the CEO needs to strategically allocate their time, energy, and assets to direct the SMEs. Typically, the CEO is the strategist, champion and leader for developing the SME or the prime reason for the business failing.{{citation needed|date=November 2018}}

The European Union sees SMEs as playing a crucial role in powering economic growth, innovation and transition to more knowledge-based economic structures.{{rp|Section 1}} At the employee level, Petrakis and Kostis (2012) explore the role of interpersonal trust and knowledge in the number of small and medium enterprises. They conclude that knowledge positively affects the number of SMEs, which in turn positively affects interpersonal trust. The empirical results indicate that interpersonal trust does not affect the number of SMEs. Therefore, although knowledge development can reinforce SMEs, trust becomes widespread in a society when the number of SMEs is greater.P.E. Petrakis, P.C. Kostis (2012), "[https://link.springer.com/article/10.1007%2Fs13132-012-0115-6 The Role of Knowledge and Trust in SMEs]", Journal of the Knowledge Economy, DOI: 10.1007/s13132-012-0115-6.

Medium- or mid-sized enterprises which have grown beyond the scale of a "small business" may have different support needs from those of small businesses, and their contribution to the local and national economy where they operate may also be quite distinct from the contribution of a smaller business.Department for Business, Innovation and Skills (UK), [https://www.gov.uk/government/statistics/msb-evidence-from-case-studies Mid-Sized Business (MSB) Growth - Evidence from Case Studies], published on 29 November 2011, accessed on 25 November 2024

Multilateral organizations have been criticized for using one measure for all.Kushnir (2010) [http://blogs.worldbank.org/psd/a-universal-definition-of-small-enterprise-a-procrustean-bed-for-smes A Universal Definition of Small Enterprise: A Procrustean bed for SMEs?], World BankGibson, T.; van der Vaart, H.J. (2008): [http://seaf.com/wp-content/uploads/2014/10/Defining-SMEs-September-20081.pdf Defining SMEs: A Less Imperfect Way of Defining Small and Medium Enterprises in Developing Countries"], Brookings Institution website, September 2008 The legal boundary of SMEs around the world vary, and below is a list of the upper limits of SMEs in some countries.

File:Expected_change_in_credit_demand_from_small_and_medium-sized_enterprises_in_2021_(%25_respondents),_Southern_Africa.png's Banking in Africa survey, 2021. Expected change in credit demand from small and medium-sized enterprises in 2021 in Southern Africa.{{Cite book|url=https://www.eib.org/en/publications/economic-report-finance-in-africa-green-smart-inclusive-private-sector-development|title=Finance in Africa: for green, smart and inclusive private sector development|date=2021-11-18|publisher=European Investment Bank|doi=10.2867/38529 |isbn=978-92-861-5063-0|language=EN |author1=European Investment Bank. }}]]African small businesses frequently struggle to get the cash they require to thrive. According to the SME Finance Forum, the formal financing gap for African SMEs averaged 17% of GDP across the 43 countries assessed in 2017.{{Cite web|title=Finance in Africa: for green, smart and inclusive private sector development|url=https://www.eib.org/en/videos/finance-in-africa-for-green-smart-and-inclusive-private-sector|access-date=2021-12-06|website=European Investment Bank|language=en}}{{Cite web|title=MSME Finance Gap|url=https://www.smefinanceforum.org/data-sites/msme-finance-gap|access-date=2021-12-20|website=SME Finance Forum|language=en}}

According to the World Bank, women own 58% of all MSMEs in Africa.{{Cite web|title=Eliminating Gender Disparities in Business Performance in Africa: Supporting Women-Owned Firms|url=https://www.worldbank.org/en/region/afr/publication/eliminating-gender-disparities-in-business-performance-in-africa-supporting-women-owned-firms|access-date=2021-12-20|website=World Bank|language=en}}{{Cite web|title=World Bank SME Finance: Development news, research, data|url=https://www.worldbank.org/en/topic/smefinance|access-date=2021-12-20|website=World Bank|language=en}}

The European Investment Bank's Banking in Africa survey, 2021 suggests that most of the responding banks had a non-performing loan (NPL) ratio of at least 5%. NPLs account for at least 10% of the SME portfolio in approximately one-third of African banks. Furthermore, 50% of the banks had at least 5% of their SME portfolio under the moratorium, and 40% had at least 5% of SME loans under some type of restructuring.

Most of Egypt's businesses are small-sized, with 97 percent employing fewer than 10 workers, according to census data released by state-run statistics body CAPMAS (Central Agency for Public Mobilization and Statistics).{{cite web |url=https://english.ahram.org.eg/News/113642.aspx |title=Egypt lacks medium-sized businesses, as analysts blame regulation |author=Marwa Hussein |website=Ahram Online |date=2014-10-22 |accessdate=2025-03-15}}

Medium-sized enterprises with 10 to 50 employees account for around 2.7 percent of total businesses. However, big businesses with over 50 employees account for 0.4 percent of all enterprises nationwide.

The data is part of Egypt's 2012/13 economic census on establishments ranging from small stalls to big enterprises. Economic activity outside the establishments – like street vendors and farmers, for example – were excluded from the census.

File:Expected_change_in_credit_demand_from_small_and_medium-sized_enterprises_over_next_year_(%25)_respondents_in_East_Africa.png's Banking in Africa survey, 2021, for the expected change in credit demand from SMEs in East Africa]]

The results show that Egypt is greatly lacking in medium-sized businesses.

Seventy percent of the country's 24 million businesses have only one or two employees. But less than 0.1 percent – only 784 businesses – employ between 45 and 49 people.

In Kenya, the term changed to MSME, which stands for "micro, small, and medium-sized enterprises".{{when|date=April 2025}}

For micro-enterprises, the minimum number of employees is up to 10 employees. For small enterprises, it is from 10 to 50. For medium enterprises, it is from 50 to 100.{{Citation needed|date=July 2022}}

The Central Bank of Nigeria defines small and medium enterprises in Nigeria according to asset base and a number of staff employed. The criteria are an asset base that is between ₦5 million ($15,400) to ₦500 million ($1,538,000), and a staff strength that is between 11 and 100 employees.{{Cite web|url=https://www.cbn.gov.ng/Out/2010/publications/guidelines/dfd/GUIDELINES%20ON%20N200%20BILLION%20SME%20CREDIT%20GUARANTEE.pdf|title=N200 BILLION SMALL AND MEDIUM ENTERPRISES CREDIT GUARANTEE SCHEME(SMECGS)|last=Central Bank Of Nigeria|date=March 30, 2010|publisher=Central Bank of Nigeria|access-date=December 9, 2017}}

In Somalia, the term is SME (for "small, medium, and micro enterprises"); elsewhere in Africa, MSME stands for "micro, small, and medium enterprises". An SME is defined as a small business that has more than 30 employees but less than 250 employees.

In the National Small Business Amendment Act 2004,{{cite web|title=Republic of South Africa, National Small Business Amendment Act|url=http://www.thedti.gov.za/business_regulation/acts/small_business_amendment_act.pdf|archive-url=https://web.archive.org/web/20150725112718/http://www.thedti.gov.za/business_regulation/acts/small_business_amendment_act.pdf|url-status=dead|archive-date=July 25, 2015|publisher=www.thedti.gov.za|access-date=10 October 2015}} micro-businesses in the different sectors, varying from the manufacturing to the retail sectors, are defined as businesses with five or fewer employees and a turnover of up to R100,000 ZAR ($6,900). Very small businesses employ between 6 and 20 employees, while small businesses employ between 21 and 50 employees. The upper limit for turnover in a small business varies from R1 million ($69,200) in the agricultural sector to R13 million ($899,800) in the catering, accommodations and other trade sectors as well as in the manufacturing sector, with a maximum of R32 million ($2,214,800) in the wholesale trade sector.

Medium-sized businesses usually employ up to 200 people (100 in the agricultural sector), and the maximum turnover varies from R5 million ($346,100) in the agricultural sector to R51 ($3,529,800) million in the manufacturing sector and R64 ($4,429,600) million in the wholesale trade, commercial agents and allied services {{Clarify|reason=What are allied services?|date=July 2022}} sector.

A comprehensive definition of an SME in South Africa is, therefore, an enterprise with one or more of the following characteristics:

• Fewer than 200 employees,
• Annual turnover of less than R64 million,
• Capital assets of less than R10 million,
• Direct managerial involvement by ownersDu Toit, Erasmus and Strydom "Definition of small business" Introduction to business management, 7th Edition Oxford University Press, 2009, p. 49

In Tunisia, the self-employed workers alone account for about 28% of the total non-farm employment, and firms with fewer than 100 employees account for about 62% of total employment.

SMEs account for nearly 90% of all company entities in developing Asian countries and are the principal private sector employers, supplying 50-80% of all jobs.{{cite journal |last1=Nguyen |first1=Lan Thanh |last2=Su |first2=Jen-Je |last3=Sharma |first3=Parmendra |title=SME credit constraints in Asia's rising economic star: fresh empirical evidence from Vietnam |journal=Applied Economics |date=21 June 2019 |volume=51 |issue=29 |pages=3170–3183 |doi=10.1080/00036846.2019.1569196 |url=https://doi.org/10.1080/00036846.2019.1569196 |issn=0003-6846|hdl=10072/384003 |s2cid=159158687 |hdl-access=free }}

SMEs cover 97-99% of all firms in South-east Asia, contributing considerably to each country's GDP—for example, 46% in Singapore, 57% in Indonesia, and over 40% in other nations.

In Bangladesh, Bangladesh Bank defines Small and medium enterprises based on fixed assets, employed manpower and yearly turn over, and they are definitely not Public Limited Co.{{Clarify|date=July 2022}} and requires these characteristics:

Key: SE = Small enterprises; ME = Medium enterprises; N/A = Not Applicable; Tk lakhs= × 100,000 Bangladeshi takas

Hong Kong defines Small and Medium Enterprises (SMEs) as any manufacturing business that employs less than 100 people or any non-manufacturing business that employs less than 50 people.{{cite web|url=https://www.success.tid.gov.hk/english/aboutus/sme/service_detail_6863.html|title=Small and medium enterprises (SME)|publisher=Support and Consultation Centre for SMEs, Trade and Industry Department (Hong Kong)|date=2022-07-20|access-date=2022-08-27}}

98% of business establishments in Hong Kong are defined as SMEs and employed 45% of the work force.{{cite web|url=https://www.tid.gov.hk/english/smes_industry/smes/smes_content.html|title=Support to Small and Medium Enterprises|date=2022-08-02|access-date=2022-08-27|publisher=Trade and Industry Department (Hong Kong)}}

India defines Micro, Small and Medium Enterprises based on dual criteria of investment and turnover.

This definition is provided in Section 7 of Micro, Small & Medium Enterprises Development Act, 2006 (MSMED Act) and was notified in September 2006. The Act provides for the classification of enterprises based on their investment size and the nature of the activity undertaken by that enterprise. As per MSMED Act, enterprises are classified into two categories - manufacturing enterprises and service enterprises. For each of these categories, a definition is given to explain what constitutes a micro-enterprise or a small enterprise or a medium enterprise. If an enterprise does not fall under the above categories, it would be considered a large-scale enterprise.

April 1, 2025, India updated the definition as follows: [https://www.pib.gov.in/PressReleasePage.aspx?PRID=2118292]

Businesses that are declared as MSMEs and within specific sectors and criteria can then apply for "priority sector" lending for help with business expenses; banks have annual targets set by the Prime Minister's Task Force on MSMEs for year-on-year increases of lending to various categories of MSMEs.{{cite web|title=Micro, Small and Medium Enterprises|url=http://www.rbi.org.in/commonman/English/scripts/FAQs.aspx?Id=966|publisher=Reserve Bank of India|access-date=9 May 2015}} MSME is considered a key contributor to India's growth and contributes 48% to India's total export.{{Citation needed|date=November 2021}}

In India, businesses need to apply for Udyam Registration with the government to avail the benefits of MSME.

In Indonesia, the government defines micro, small, and medium enterprises (Indonesian: usaha mikro kecil menengah, UMKM) based on their assets and revenues according to Law No. 20/2008:{{cite web|title=Indonesian Government Law No. 20 of 2008|url=http://eng.kppu.go.id/newkppu/wp-content/uploads/2016/11/LAW-OF-THE-REPUBLIC-OF-INDONESIA-20-OF-2008.pdf|publisher=Commission for the Supervision of Business Competition|access-date=2 November 2017}}

An annual revenue of Rp 50 billion is approximately equal to US$3.1 million as of April 2024.{{cite web |title=1 USD To IDR Convert United States Dollar To Indonesian Rupiah |url=https://www.forbes.com/advisor/money-transfer/currency-converter/usd-idr/ |url-status=live |archive-url=http://web.archive.org/web/20240414163427/https://www.forbes.com/advisor/money-transfer/currency-converter/usd-idr/ |archive-date=2024-04-14 |website=Forbes |access-date=2024-04-14}}{{cite news |last1=Jiao |first1=Claire |last2=Kim |first2=Hooyeon |last3=Makol |first3=Malavika Kaur |date=2024-04-01 |title=Rupiah at Four-Year Low Triggers Intervention, Rate Hike Talk |url=https://www.bloomberg.com/news/articles/2024-04-02/rupiah-dips-to-four-year-low-on-bond-outflows-dollar-strength |work=Bloomberg News |access-date=2024-04-14 |url-access=subscription}}

Despite their significant contribution to GDP and job creation, Indonesian MSMEs confront a number of obstacles. One of the most significant is capital access: 60-70 percent of MSMEs lack access to financial institutions and their funding options. Other restrictions include inadequate infrastructure, difficulties acquiring company licences and permissions, high tax rates, political insecurity, and improving their brand image in the digital era.{{cite journal |last1=Torm |first1=Nina |title=To what extent is social security spending associated with enhanced firm-level performance? A case study of SMEs in Indonesia |journal=International Labour Review |date=September 2020 |volume=159 |issue=3 |pages=339–366 |doi=10.1111/ilr.12155 |s2cid=214429710 |url=https://doi.org/10.1111/ilr.12155 |language=en |issn=0020-7780|url-access=subscription }}

21st-century businesses strategically use both their websites and social media in order to advertise their products and control their branding. Quality content on both information streams will positively affect branding and attract customers.{{cite journal |last1=Suryani |first1=Tatik |last2=Fauzi |first2=Abu Amar |last3=Nurhadi |first3=Mochamad |title=Enhancing Brand Image in the Digital Era: Evidence from Small and Medium-sized Enterprises (SMEs) in Indonesia |journal=Gadjah Mada International Journal of Business |date=14 August 2021 |volume=23 |issue=3 |pages=314–340 |doi=10.22146/gamaijb.51886 |language=en |eissn=2338-7238 |doi-access=free}}

The People's Business Credit (Kredit Usaha Rakyat, or KUR [id]) was established in 2007 by President Yudhoyono to extend credit to businesses that were considered "feasible but not bankable". Bank Rakyat Indonesia conducts more than half of KUR lending nationwide.{{Cite report |title=The World's Best-Kept Financial Inclusion Secret Revealed: The Untold Success Story of BRI Microbanking Since 1895 |date=2022-11-18 |url=https://ash.harvard.edu/wp-content/uploads/2024/02/bri_microbanking_paper.pdf |last=Rosengard |first=Jay K. |access-date=2024-04-14 |publisher=Ash Center for Democratic Governance and Innovation |page=21}} In Jakarta, the capital city of Indonesia, 529 MSMEs with the potential to be funded have been identified by Bank Indonesia.{{cite web |title=Database UMKM |url=https://www.bi.go.id/id/umkm/database/umkm-layak-dibiayai.aspx |website=www.bi.go.id}}

According to the Department of Trade and Industry's 2020 List of Establishments report, there are 957,620 registered business enterprises operating in the country, composed of 99.51% MSMEs and 0.49% large firms. The MSMEs consist of 88.77% microenterprises, 10.25% small enterprises, and 0.49% medium enterprises. Among the top industry sectors include (1) wholesale and retail trade; repair of motor vehicles and motorcycles (445,386); (2) accommodation and food service activities (134,046); (3) manufacturing (110,916); (4) other service activities (62,376); and (5) financial and insurance activities (45,558) which accounted for about 83.77% of the total number of MSME establishments. Prior to the pandemic, MSMEs generated more than 5.38 million jobs or 62.66% of the country's total employment with a 29.38% share from micro-enterprises followed by 25.78% and 7.50% for small and medium enterprises.

With effect from 1 April 2011, the definition of SMEs is businesses with annual sales turnover of not more than $100 million or employing no more than 200 staff.{{cite web|title=Fact Sheet on New SME Definition|url=https://www.spring.gov.sg/NewsEvents/PR/Documents/Fact_Sheet_on_New_SME_Definition.pdf}}

File:Small_and_medium_enterprises_that_invested_in_becoming_more_digital_as_a_response_to_COVID-19_and_received_public_financial_support_over_the_past_three_years.png

Small companies are important to the European economy as they account for 99.8% of non-financial enterprises in the European Union (EU) and employ two-thirds of the workforce in the EU.{{Cite web|title=Digital innovation hubs to the rescue|url=https://www.eib.org/en/stories/digital-innovation-hubs|access-date=2021-07-15|website=European Investment Bank|language=en}}{{Cite web|last=Anonymous|date=2016-07-05|title=Entrepreneurship and Small and medium-sized enterprises (SMEs)|url=https://ec.europa.eu/growth/smes_en|access-date=2021-07-15|website=Internal Market, Industry, Entrepreneurship and SMEs - European Commission|language=en}} The majority of European firms are small and medium-sized enterprises (SMEs), employing over 100 million people. Due to the COVID-19 pandemic, a large majority of SMEs saw a decline in revenue during 2020-2021.{{Cite book |url=https://www.eib.org/en/publications/activity-report-2021 |title=EIB Activity Report 2021 |date=2022-01-27 |publisher=European Investment Bank |isbn=978-92-861-5108-8 |language=EN}}{{Cite web |title=Small and medium-sized enterprises {{!}} Fact Sheets on the European Union {{!}} European Parliament |url=https://www.europarl.europa.eu/factsheets/en/sheet/63/small-and-medium-sized-enterprises |access-date=2022-05-12 |website=www.europarl.europa.eu |language=en}}{{Cite web |title=Two companies empower small businesses and grow together |url=https://www.eib.org/en/stories/pandemic-recovery-small-business |access-date=2022-05-12 |website=European Investment Bank |language=en}}{{Cite web |title=Europe's Small and Medium-sized Enterprises, Start-ups… |url=https://www.reneweuropegroup.eu/campaigns/2021-07-01/europes-small-and-medium-sized-enterprises-start-ups-and-entrepreneurs-are-a-renew-europe-priority |access-date=2022-05-12 |website=Renew Europe |language=en}}

Medium-sized businesses (or mid-caps) play an important role in the European economy, accounting for a considerable part of employment and wealth production. According to a recent European Commission analysis, mid-cap companies (250-3000 people) make up about 17% of total employment and 21% of turnover in the EU27 business sector.{{Cite book |last1=Austrian Institute of Technology (AIT) |url=https://data.europa.eu/doi/10.2873/546623 |title=Study to map, measure and portray the EU mid-cap landscape: final report |last2=Directorate-General for Internal Market |first2=Industry |last3=Integral Research (United Kingdom) |last4=The Economic and Social Research Institute (ESRI Ireland) |last5=Dachs |first5=Bernhard |last6=Siedschlag |first6=Iulia |last7=Yan |first7=Weijie |last8=Yoveska |first8=Maria |last9=Boeira |first9=Fernanda |date=2022 |publisher=Publications Office of the European Union |isbn=978-92-76-54830-0 |location=LU|doi=10.2873/546623 }}

Micro firms (with fewer than nine employees) employ 38% of the total workforce, while SMEs with fewer than 250 employees account for 34.4%. Larger (XL) firms with 3,000 or more employees account for 10.1% of overall employment in EU business sectors. According to Eurostat SBS statistics, in 2021, tiny enterprises (0-9 workers) and SMEs (excluding micro firms) employed around 30% and 34.5% of the entire workforce in EU27 business sectors, while bigger firms (250+ employees) contributed for 36.4% of overall employment.{{Cite web |title=EU small and medium-sized enterprises: an overview |url=https://ec.europa.eu/eurostat/web/products-eurostat-news/-/edn-20220627-1 |access-date=2024-01-24 |website=ec.europa.eu |language=en-GB}}

The pandemic has had a greater impact on SMEs than on large businesses, with an average sales loss of 26% versus 23% for large businesses.{{Cite book |url=https://www.eib.org/en/publications/business-resilience-in-the-pandemic-and-beyond |title=Business resilience in the pandemic and beyond: Adaptation, innovation, financing and climate action from Eastern Europe to Central Asia |date=2022-05-18 |publisher=European Investment Bank |isbn=978-92-861-5086-9 |language=EN}}{{Cite web |title=Home |url=https://www.oecd-ilibrary.org/sites/6039c015-en/index.html?itemId=/content/component/6039c015-en |access-date=2022-07-19 |website=www.oecd-ilibrary.org |language=en}} Government assistance appears to have benefited SMEs more than large corporations among the companies that do have overdraft facilities, indicating a successful application of policies to ease financial limitations for SMEs even when they receive help from the banking sector.{{Cite web |date=2018-07-06 |title=Financing the economy - SMEs, banks and capital markets |url=https://www.bankingsupervision.europa.eu/press/speeches/date/2018/html/ssm.sp180706.en.html |access-date=2022-07-19 |website=European Central Bank - Banking supervision |language=en}} The EIB Group contributed more than €16.35 billion to small and medium-sized firms in 2022.{{Cite web |title=Slovak high tech metallurgy business booms with EU financing |url=https://www.eib.org/en/stories/slovak-high-tech |access-date=2023-09-25 |website=European Investment Bank |language=en}}

SMEs were more responsive in altering output during the pandemic, despite the intensity of the shock. In reaction to the crisis, one-third of major enterprises altered their output or services, compared to 37% of SMEs.

Large businesses, on the other hand, embraced digitization to a greater extent than small businesses, with 26% boosting their online distribution of products and services, compared to 22% for SMEs. The most significant difference in adaption measures was shown in the chance of expanding remote work, which increased by 25% among SMEs but 50% among large businesses.{{Cite web |title=Productivity gains from teleworking in the post COVID-19 era: How can public policies make it happen? |url=https://www.oecd.org/coronavirus/policy-responses/productivity-gains-from-teleworking-in-the-post-covid-19-era-how-can-public-policies-make-it-happen-a5d52e99/ |access-date=2022-07-19 |website=OECD |language=en}}

The criteria for defining the size of a business differ from country to country, with many countries having programs of business rate reduction and financial subsidy for SMEs. According to the European Commission,{{Cite web|title=What is an SME? - Small and medium sized enterprises (SME) - Enterprise and Industry |url=http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm |website=ec.europa.eu |access-date=2015-06-12 |url-status=unfit |archive-url=https://web.archive.org/web/20150208090338/http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm |archive-date=February 8, 2015 }} SMEs are enterprises which meet the following definition of staff headcount and either the turnover or balance sheet total definitions:

In July 2011, the European Commission said it would open a consultation on the definition of SMEs in 2012. A consultation document was issued on 6 February 2018 and the consultation period closed on 6 May 2018. {{as of|November 2019}}, no conclusions or responses have yet emerged.European Commission, [https://ec.europa.eu/info/consultations/public-consultation-review-sme-definition_en Public consultation on the review of the SME definition], accessed 22 November 2019

In Europe, there are three broad parameters that define SMEs:

• Micro-enterprises have up to 10 employees
• Small enterprises have up to 50 employees
• Medium-sized enterprises have up to 250 employees.{{cite web | last = European Commission | author-link = European Commission | title = Recommendation 2003/361/EC: SME Definition | date = 2003-05-06 | url = http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm | access-date = 2012-09-28 | url-status = dead | archive-url = https://web.archive.org/web/20150208090338/http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm | archive-date = 2015-02-08 }}

The European definition of SME follows: "The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro."[http://ec.europa.eu/enterprise/policies/sme/files/sme_definition/sme_user_guide_en.pdf Enterprise and Industry Publications: The new SME definition, user guide and model declaration], Extract of Article 2 of the Annex of Recommendation 2003/361/EC In order to prepare for an evaluation and revision of some features of the small and medium-sized enterprises definition European Union established public consultation period from 6 February 2018 to 6 May 2018. Public consultation is available for all EU member country citizens and organizations. Especially, national and regional authorities, enterprises, business associations or organizations, venture capital providers, research and academic institutions, and individual citizens are expected as the main contributors.{{Cite web|url=https://ec.europa.eu/info/consultations/public-consultation-review-sme-|title=Consultations|website=European Commission - European Commission|language=en|access-date=2018-02-19}}

EU member states have had individual definitions of what constitutes an SME. For example, the definition in Germany had a limit of 255 employees, while in Belgium it could have been 100. The result is that while a Belgian business of 249 employees would be taxed at full rate in Belgium, it would nevertheless be eligible for SME subsidy under a European-labelled programme.

SMEs are a crucial element in the supplier network of large enterprises which are already on their way towards Industry 4.0.{{cite journal|last1=Sommer|first1=Lutz|title=Industrial revolution - industry 4.0: Are German manufacturing SMEs the first victims of this revolution?|journal=Journal of Industrial Engineering and Management|date=28 November 2015|volume=8|issue=5|doi=10.3926/jiem.1470|doi-access=free|hdl=2117/84671|hdl-access=free}}

According to German economist Hans-Heinrich Bass, "empirical research on SME as well as policies to promote SME have a long tradition in [West] Germany, dating back into the 19th century. Until the mid-20th century, most researchers considered SME as an impediment to further economic development and SME policies were thus designed in the framework of social policies. Only the Ordoliberalism school, the founding fathers of Germany's social market economy, discovered their strengths, considered SME as a solution to mid-20th century economic problems (mass unemployment, abuse of economic power), and laid the foundations for non-selective (functional) industrial policies to promote SMEs."[http://www.iwim.uni-bremen.de/publikationen/pdf/b101.pdf Hans-Heinrich Bass: KMU in der deutschen Volkswirtschaft: Vergangenheit, Gegenwart, Zukunft, Berichte aus dem Weltwirtschaftlichen Colloquium der Universität Bremen Nr. 101, Bremen 2006] {{Webarchive|url=https://web.archive.org/web/20171215101921/http://www.iwim.uni-bremen.de/publikationen/pdf/b101.pdf |date=2017-12-15 }} (PDF; 96 kB) Only around 20% of European SMEs are substantially digitalized, compared to almost 50% of major businesses.{{Cite web|title=Small and medium-sized enterprises: an overview|url=https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ddn-20200514-1|access-date=2021-07-15|website=ec.europa.eu|language=en-GB}} Small and medium-sized companies make up 56.2% of the non-financial sector.

File:Major_obstacles_small_and_medium_enterprises_face_when_investing_in_digital_technologies.png

Smaller companies account for more than 60% of the value contributed to the non-financial sector in Belgium, Italy, and Spain, three of the nations worst hit by the COVID-19 pandemic.{{Cite web|title=Small and medium-sized enterprises: an overview|url=https://ec.europa.eu/eurostat/web/products-eurostat-news/-/EDN-20191125-1|access-date=2021-07-15|website=ec.europa.eu|language=en-GB}} An estimated 50% of Europe's small firms may fail because they lack the substantial financial reserves required to weather the crisis.{{Cite web|title=Coronavirus (COVID-19): SME policy responses|url=https://www.oecd.org/coronavirus/policy-responses/coronavirus-covid-19-sme-policy-responses-04440101/|access-date=2021-07-15|website=OECD|language=en}}

With around 338,000 functioning in Bulgaria in 2022, SMEs and mid-caps are major contributors in the Bulgarian economy. They also employ over 75% of the workforce and create 65% of the economy's added value.{{Cite web |title=More than 75% of employees in Bulgaria work in small and medium-sized enterprises ● Ministry of Economy and Industry |url=https://www.mi.government.bg/en/news/more-than-75-of-employees-in-bulgaria-work-in-small-and-medium-sized-enterprises/ |access-date=2023-06-28 |website=www.mi.government.bg}}{{Cite web |last=PricewaterhouseCoopers |title=Supporting SMEs in Bulgaria |url=https://www.pwc.com/c1/en/future-of-government-cee/entrepreneurship-and-smes-in-CEE/supporting-smes-in-bulgaria.html |access-date=2023-06-28 |website=PwC}}{{Cite web |title=EBRD financing to support Bulgarian firms affected by war on Ukraine |url=https://www.ebrd.com/news/2022/ebrd-financing-to-support-bulgarian-firms-affected-by-war-on-ukraine.html |access-date=2023-06-28 |website=www.ebrd.com |language=en}}{{Cite web |title=Seeds of growth |url=https://www.eib.org/en/stories/guarantees-bulgarian-businesses-employment-economy |website=eib.org}}

The results of an EU survey conducted in 2021 suggest that during the pandemic, in countries with larger fiscal packages, SMEs were on average more likely to experience bankruptcy even after controlling for the size of the shock, the use of bank financing, and country and sector fixed effects. When policy assistance rises by 1% of GDP, the probabilities of bankruptcy for a SME are 2.7 times higher than for a non-SME.{{Cite journal |last1=Dörr |first1=Julian Oliver |last2=Licht |first2=Georg |last3=Murmann |first3=Simona |date=2022-02-01 |title=Small firms and the COVID-19 insolvency gap |url=https://doi.org/10.1007/s11187-021-00514-4 |journal=Small Business Economics |language=en |volume=58 |issue=2 |pages=887–917 |doi=10.1007/s11187-021-00514-4 |pmid=38624681 |issn=1573-0913 |pmc=8258278}} Credit limitations are especially difficult for SMEs and new businesses to overcome. Credit constraints affect 24% of SMEs and 27% of young businesses.

Medium-sized firms are ahead of SMEs in terms of digital technology adoption, with performance comparable to that of larger enterprises. Over 84% of XL businesses invested in at least one digital technology, compared to approximately 75% for mid-caps.{{Cite book |url=https://www.eib.org/en/publications/20230277-hidden-champions-missed-opportunities-mid-caps-crucial-role-in-europe-s-economic-transition |title=Hidden champions, missed opportunities: Mid-caps' crucial role in Europe's economic transition |date=2024-01-10 |publisher=European Investment Bank |isbn=978-92-861-5731-8 |language=EN}}{{Cite web |title=The Digital Transformation of SMEs |url=https://www.oecd.org/industry/smes/PH-SME-Digitalisation-final.pdf}}

Since the COVID-19 pandemic began in early 2020, SMEs in Europe have suffered unprecedented economic instability and turbulence. In 2023, they faced further challenges, including higher input costs, higher borrowing costs and uncertainty.{{Cite book |author=European Investment Bank|url=https://www.eib.org/en/publications/20240079-eib-group-activity-in-eu-cohesion-regions-2023 |title=EIB Group activities in EU cohesion regions 2023 |date=2024-07-15 |publisher=European Investment Bank |isbn=978-92-861-5761-5 |language=EN}}{{Cite web |title=SME Performance Review - European Commission |url=https://single-market-economy.ec.europa.eu/smes/sme-strategy-and-sme-friendly-business-conditions/sme-performance-review_en |access-date=2024-08-07 |website=single-market-economy.ec.europa.eu |language=en}}

As a result, the SME value added in the European Union, adjusted for inflation, remains below the pre-crisis level of 2019, and is anticipated to fall further in 2024.

Inflation’s impact is more pronounced for small and medium-sized enterprises, with the probability of increased investment rising by 4.3 percentage points compared to a smaller 1.7 percentage point increase for larger firms, as of 2024.{{Cite book |last=Bank |first=European Investment |url=https://www.eib.org/en/publications/20240244-economics-working-paper-2024-03 |title=EIB Working Paper 2024/03 - Investment decisions in a high-inflation environment |date=2024-08-26 |publisher=European Investment Bank |isbn=978-92-861-5802-5 |language=EN}} Rising energy costs led to a 5.6 percentage point increase in planned investments in energy efficiency, largely driven by SMEs, increasing from 52.3% to 57.9% in 2022.{{Cite book |last=Bank |first=European Investment |url=https://www.eib.org/en/publications/20240244-economics-working-paper-2024-03 |title=EIB Working Paper 2024/03 - Investment decisions in a high-inflation environment |date=2024-08-26 |publisher=European Investment Bank |isbn=978-92-861-5802-5 |language=EN}}

In the European Union, SMEs have played a significant role in advancing the goals of the Green Deal. Many SMEs increased their planned investments in energy efficiency by 5.6% in 2022, from 52.3% to 57.9%. The European Green Deal's emphasis on energy efficiency aligned with this trend, helping to drive investments aimed at reducing emissions and energy consumption. {{Cite web |title=Eurobarometer |url=https://europa.eu/eurobarometer/surveys/detail/2287 |access-date=2024-09-27 |website=europa.eu}}{{Cite web |date=2022-04-08 |title=Energy and the Green Deal |url=https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/energy-and-green-deal_en |access-date=2024-09-27 |website=commission.europa.eu |language=en}}

The SME sector in Poland generates almost 50% of the GDP, and out of that, for instance, in 2011, micro companies generated 29.6%, small companies 7.7%, and medium companies 10.4% (big companies 24.0%; other entities 16.5%, and revenues from customs duties and taxes generated 11.9%). In 2011, out of the total of 1,784,603 entities operating in Poland, merely 3,189 were classified as "large", so 1,781,414 were micro, small, or medium. SMEs employed 6.3 million people out of the total of 9.0 million of labour employed in the private sector. In Poland in 2011 there were 36.2 SMEs per 1,000 inhabitants.[http://www.mcser.org/journal/index.php/mjss/article/view/1144/1173 D. Walczak, G. Voss, New Possibilities of Supporting Polish SMEs within the Jeremie Initiative Managed by BGK, Mediterranean Journal of Social Sciences, Vol 4, No 9, p. 760-761].

Nearly seven million people are employed by small businesses in Poland, which accounts for around half of the country's GDP, yet smaller businesses are less likely than larger ones to invest in strategies to combat climate change or boost energy efficiency. In October 2021, the Bank Ochrony Środowiska, a Polish bank that specializes in funding environmental protection initiatives received €75 million from the European Investment Bank (EIB) for these small enterprises.{{Cite web |title=EIB Group Activities in EU cohesion regions in 2021 |url=https://www.eib.org/en/publications/online/eib-group-activities-in-eu-cohesion-regions-2021 |access-date=2022-09-15 |website=www.eib.org}}

The Polish bank wants to use at least 50% of the loan for initiatives with a clear emphasis on tackling climate change, such improving building energy efficiency or turning to renewable energy sources like solar power. The money is set to be distributed across Poland, with around 80% of it projected to go to cohesive regions.

Slovenia's one-stop-shops for SMEs were recognised by the European Commission in 2008 as a good practice example in making public administration responsive to SME need.Commission of the European Communities, [https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52008DC0394 "Think Small First: A "Small Business Act for Europe"], COM(2008)394 final, published on 25 June 2008, accessed on 14 July 2024{{rp|19}}

In Norway it is normal to describe small and medium-sized businesses as businesses with fewer than 100 employees. Businesses with 1–20 employees are defined as small, while businesses with 21–100 employees are considered medium-sized. A business with more than 100 employees would be considered a large business. "Micro-sized businesses" is a little-used expression in Norway.[https://www.nho.no/tema/sma-og-mellomstore-bedrifter/artikler/sma-og-mellomstore-bedrifter-smb/ NHO]

Small and medium-sized businesses make up more than 99% of all businesses in Norway, and together they employ 47% of all employees in the private sector. Together, SMEs account for 44% of the economic value added each year: almost 700 billion Norwegian Kroner (NOK).[https://www.nho.no/tema/sma-og-mellomstore-bedrifter/artikler/sma-og-mellomstore-bedrifter-smb/ Fakta om små og mellomstore bedrifter (SMB)]

In Switzerland, the Federal Statistical Office defines small and medium-sized enterprises as companies with less than 250 employees.{{in lang|fr}} [https://www.bfs.admin.ch/bfs/fr/home/statistiques/industrie-services/entreprises-emplois/structure-economie-entreprises/taille-forme-juridique-secteurs-repartition-regionale.html Taille, forme juridique, secteurs, répartition régionale], Swiss Federal Statistical Office (page visited on 24 October 2017). The categories are the following:

• Microentreprises: 1 to 9 employees
• Small enterprises: 10 to 49 employees
• Medium-sized enterprises: 50 to 249 employees
• Large enterprises: 250 employees or more

In the United Kingdom (UK), a company is defined as being an SME if it meets two out of three criteria: it has a turnover of less than £25m, it has fewer than 250 employees, it has gross assets of less than £12.5m.{{cite web|url=https://www.gov.uk/government/collections/mid-sized-businesses|website=gov.uk|publisher=Department of Business, Innovation and Skills|title=Mid-sized businesses|date=20 November 2014 |access-date=11 June 2015|ref=bis_sme_definition}} Very small companies are called in the UK micro-entities, which have simpler financial reporting requirements. Such micro-enterprises must meet any two of the following criteria: balance sheet £316,000 or less; turnover £632,000 or less; employees 10 or less.{{cite web |title=Micro-entities, small and dormant companies |url=https://www.gov.uk/annual-accounts/microentities-small-and-dormant-companies |publisher=GOV.UK}}

Many small and medium-sized businesses form part of the UK's currently growing {{lang|de|Mittelstand}}, or Brittelstand as it is also sometimes named.{{cite news |url=https://www.ft.com/content/7bbbf9e8-1f35-11e5-ab0f-6bb9974f25d0 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/7bbbf9e8-1f35-11e5-ab0f-6bb9974f25d0 |archive-date=2022-12-10 |url-access=subscription |url-status=live |title=Brittelstand stymied by lack of growth and skills |first=Brian |last=Groom |date=1 October 2015 |work=Financial Times |access-date=11 September 2020 }} These are businesses in Britain that are not only small or medium but also have a much broader set of values and more elastic definition.

The Department for Business Innovation and Skills estimated that at the start of 2014, 99.3% of UK private sector businesses were SMEs, with their £1.6 trillion annual turnover accounting for 47% of private sector turnover.{{cite web|title=Bridging loans UK can be used for many purposes|url=http://konnectfinancial.co.uk/loan-products/bridging-loans/|website=www.konnectfinancial.co.uk|publisher=Konnect Financial|access-date=10 October 2015|archive-url=https://web.archive.org/web/20151011052641/http://konnectfinancial.co.uk/loan-products/bridging-loans/|archive-date=11 October 2015|url-status=dead|df=dmy-all}}{{cite web | url=https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/377934/bpe_2014_statistical_release.pdf | title=Statistical Release: Business Population Estimates for the UK and Regions 2014 | publisher=Department for Business Innovation and Skills | date=26 November 2014 | access-date=9 May 2015}}

In order to support SMEs, the UK government set a target in 2010 "that 25% of government’s spend, either directly or in supply chains, goes to SMEs by 2015"; it achieved this by 2013.{{cite web | url=https://www.gov.uk/government/publications/2010-to-2015-government-policy-government-buying/2010-to-2015-government-policy-government-buying#appendix-1-making-sure-government-gets-full-value-from-small-and-medium-sized-enterprises | title=2010 to 2015 government policy: government buying | date=20 February 2013 | access-date=9 May 2015}}

Industry Canada defines a small business as one with fewer than 100 paid employees, and a medium-sized business as one with at least 100 and fewer than 500 employees. As of December 2012, there were 1,107,540 employer businesses in Canada of the rally {{Clarify|date=July 2022}}. Canadian controlled private corporations receive a 17% reduction in the tax rate on taxable income from active businesses up to $500,000. This small business deduction is reduced for corporations whose taxable capital exceeds $10M and is eliminated for corporations whose taxable capital exceeds $15M.{{cite web|title=T2 Corporation - Income Tax Guide - Chapter 4: Page 4 of the T2 return|url=http://www.cra-arc.gc.ca/E/pub/tg/t4012/t4012-06-e.html|publisher=Canada Revenue Agency|access-date=27 April 2014}} It has been estimated that almost $2 trillion of Canadian SMEs will be coming up for sale over the next decade, which is twice as large as the assets of the top 1,000 Canadian pension plans and approximately the same size as Canadian annual GDP.{{Cite web|url=http://www.equicapita.com/wp-content/uploads/2013/04/Equicapita_May_050214.pdf|title=Equicapita May 2014 - Who Will Buy Baby Boomer Businesses?}}

The small and medium-sized companies in Mexico are called PYMEs, which is a direct translation of SMEs. There is also another categorization in the country called MiPyMEs. The MiPyMEs are micro, small and medium-sized businesses, with an emphasis on micro which are one man companies or a type of freelance.

In the United States, the Small Business Administration sets small business criteria based on industry, ownership structure, revenue and number of employees (which in some circumstances may be as high as 1500, although the cap is typically 500).{{cite web|last=United States Small Business Administration|title=Size Standards|access-date=2023-09-21|url=https://www.sba.gov/federal-contracting/contracting-guide/size-standards}}

Both the US and the EU generally use the same threshold of fewer than 10 employees for small offices (SOHO).{{Citation needed|reason=A citation is needed for the claim that the European Union and Small Business Administration have a size-standard classification for the term small office or SOHO|date=February 2014}}

In Australia, a SME has 200 or fewer employees. Micro Businesses have 1–4 employees, small businesses 5–19, medium businesses 20–199, and large businesses 200+.{{cite web|url = http://www.abs.gov.au/ausstats/abs@.nsf/mf/1321.0|title = 1321.0 - Small Business in Australia, 2001|date = 23 October 2002|access-date = 30 September 2015}} Australian SMEs make up 98% of all Australian businesses, produce one-third of total GDP, and employ 4.7 million people. SMEs represent 90 percent of all goods exporters and over 60% of services exporters.{{cite web|url=http://smallbusinessassociation.com.au/wp-content/uploads/2016/03/INTRODUCTION-TO-FTRA.pdf|title=AN INTRODUCTION TO FTAs (FREE TRADE AGREEMENTS)|publisher=Small Business Association of Australia, 2015|access-date=29 March 2016}}{{dead link|date=May 2018 |bot=InternetArchiveBot |fix-attempted=yes }}

In New Zealand, 99% of businesses employ 50 or less staff, and the official definition of a small business is one with 19 or fewer employees.{{Cite web|url=http://www.mbie.govt.nz/info-services/business/business-growth-agenda/pdf-and-image-library/2014/The%20Small%20Business%20Sector%20Report%202014%20-PDF%208.8%20MB-1.pdf|title=The Small Business Sector Report 2014|last=Ministry of Business, Innovation and Employment|date=2014|website=Ministry of Business, Innovation and Employment|publisher=MBIE|archive-url=https://web.archive.org/web/20170312071614/http://www.mbie.govt.nz/info-services/business/business-growth-agenda/pdf-and-image-library/2014/The%20Small%20Business%20Sector%20Report%202014%20-PDF%208.8%20MB-1.pdf|archive-date=2017-03-12|url-status=dead}}[http://www.med.govt.nz/business/business-growth-internationalisation/pdf-docs-library/small-and-medium-sized-enterprises/structure-and-dynamics-2011.pdf "SMEs in New Zealand: Structure and Dynamics 2011"], Page 10-11, Ministry of Economic Development It is estimated that approximately 28% of New Zealand's gross domestic product is produced by companies with fewer than 20 employees.{{Cite web|url=https://www.mbie.govt.nz/info-services/sectors-industries/sectors-reports-series/pdf-image-library/the-small-business-sector-report-and-factsheet/small-business-factsheet-2017.pdf|website=www.mbie.govt.nz|access-date=2018-12-09|title=Archived copy|archive-url=https://web.archive.org/web/20181210063501/https://www.mbie.govt.nz/info-services/sectors-industries/sectors-reports-series/pdf-image-library/the-small-business-sector-report-and-factsheet/small-business-factsheet-2017.pdf|archive-date=2018-12-10|url-status=dead}}

== See also ==

• Environmental regulation of small and medium enterprises
• Hidden champions
• Mittelstand
• Small and medium enterprises in Mexico
• Small business

{{reflist|30em}}

• [http://www.oecd.org/cfe/smes SMEs and Entrepreneurship at the OECD]
• [https://web.archive.org/web/20150208090338/http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm SME definition by European Commission]
• [https://web.archive.org/web/20140714215426/http://www.thesmallbusinessexpo.com/exhibit.php Small Business Expo Events Schedule USA]

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