Financing small and medium sized enterprises in Malta

Abstract

By Maltese Law, companies which, on their balance sheet date, satisfy two of the three criteria are deemed to be small. The three criteria are the following: • balance sheet total must not exceed Lm100,000 • turnover must not exceed Lm2,200,000 in a financial year • average number of employees during the accounting period must not exceed fifty About 95% of companies in Malta satisfy these conditions, and are thus considered to be small or medium sized. Small enterprises play an important part in our society, but their life is not always easy. Large firms enjoy substantial advantages over the small firms. In most industries, large firms enjoy the advantages from economies of scale. Technical economies arise from the ability to use expensive machinery capable of high output at low unit cost. The large firm can afford specialisation of its people and machines and can reap the rewards of the increased efficiency brought about by this specialisation. The same applies with regards to the fields of marketing, finance, management, and risk-bearing. But there are some diseconomies of large scale operation. Overheads may become excessive. Co-ordination and communication may become difficult to handle. Control is difficult to maintain. Ownership may have to be divided with some outsiders.