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Policymakers should provide support for SMEs to help them with financial assistance and tax relief measures. Financial support is crucial for SMEs during the recovery phase, and policymakers should take proactive measures to provide assistance and relief. Lu et al. (2020) recommend financial assistance programs, tax relief measures, and regulatory flexibility to help SMEs adapt to new market conditions. Katare et al. (2021) highlight the importance of targeted support, financial assistance programs, and investment in digital technologies.
These programs could include financial assistance programs, regulatory flexibility, and technical assistance to help small businesses adapt to new market conditions. The European Union (EU) has implemented a comprehensive set of initiatives to aid the recovery of SMEs in the wake of the COVID-19 pandemic. Financial support is being provided through programs such as the European Investment Fund (EIF) and the European Investment Bank (EIB). Loans of up to €1 billion are guaranteed up to 90% for young companies, which can cover up to 18 months of the financing needs for SMEs and 12 months for other businesses (Fairlie, 2020). Table 1 shows the European Union initiatives to support SMEs' recovery.
Table 1. Initiatives Implemented by the European Union (EU) to Aid the Recovery of SMEs in the Wake of the COVID-19 Pandemic
| Initiative | Description |
|---|
European Investment Fund (EIF)
| Provides loans, guarantees, and equity financing to SMEs for financial support
|
European Investment Bank (EIB)
| Provides loans, guarantees, and equity financing to SMEs for financial support
|
Kreditanstalt für Wiederaufbau (KfW)
| Guarantees loans of up to €1bn to up to 90% for young companies, covering up to 18 months of financing needs for SMEs and 12 months for other businesses
|
| Importance of SMEs | Represent 99% of all enterprises and account for over 50% of Europe’s GDP |
Note. Source: EU Commission Recovery Plan 2020 https://www.consilium.europa.eu/en/policies/eu-recovery-plan/
Chen et al. (2022) and Haqbin et al. (2022) found that government policies such as tax relief measures, financial assistance programs, and regulatory flexibility have been effective in providing immediate relief to SMEs.
TopDigital transformation involves investing in digital technologies and talent and exploring alternative financing sources. Digital transformation has become increasingly imperative for SMEs since the COVID-19 pandemic. Recognizing this urgency, the EU launched initiatives such as Digital Innovation Hubs and European Digital Innovation Hubs (EDIHs). Digital Innovation Hubs provide SMEs with tailored support and training to help them adopt new technologies and digitize their operations. Meanwhile, EDIHs aim to connect SMEs with innovation ecosystems and provide the latest technological solutions, but careful planning and investment are required (Klein & Todesco, 2021).
Kindström (2010) emphasizes the need for small businesses to make drastic changes to their operations, adapt their business models to new customer expectations, and adjust staffing models and labor practices. He highlights the need for small businesses to be flexible and adaptable in order to survive in a rapidly changing environment.