Abstract

Small- and medium size enterprises are well known for being the backbone of the economy. They are the key factors of the economic growth as well as for innovating and developing products and services. Financial obstacles often occur for Swedish SMEs when they are searching for ways of financing the business. The lack of necessary financing to help SMEs’ businesses grow has been brought up in many institutions supportive of Swedish SMEs.

This study is conducted to examine and give an understanding of how Swedish SMEs established in China are financing their businesses since strong internal financing results in a decrease for a need for external financing. Furthermore, the study is looking at what type of financial obstacles SMEs may encounter.

For this purpose the relevant arguments are presented and discussed. This is done through a qualitative approach as well as hermeneutic phenomenology for a more in depth analysis on how certain Swedish SMEs are financing their business in China. The writers have chosen to interview Swedish SMEs who in some way are in the business of manufacturing and production and who are established in China.  Interviews were also conducted with representatives from financial institutions in order to gather information on how Swedish SMEs can access external financing. All of the interviews were performed in a semi-structured manner. When the information was gathered some of the Swedish SMEs requested the answers to be anonymous, therefore the writers is keeping all answers from the responding SMEs anonymous in the result and analysis part of the thesis. The answers from the financial representatives are however clearly stated which respondent answered what. Additionally, the writers found that most of the existing research on financing can explain the SMEs financial decisions, yet there was some adaption needed in regards to the theories in order for them to fit into the context of the Swedish SMEs and financiers.

Moreover, the authors found that there is no large financing gap or demand to require additional credit from traditional banks or other financiers. Hence, the participating Swedish SMEs established in China mainly obtain financing from shareholder equity or other internal sources to finance their business.