External ratings for SMEs in the context of Basel II

With the introduction of Basel II the interest for external credit ratings for small and medium-sized enterprises (SMEs) has been increased. An external rating theoretically includes high potentials for SMEs to solve the problems they currently are faced with. But why have only few ratings been implemented so far? Why is the adequacy and usefulness of external ratings still questioned? The author has implemented an empirical research comprising a survey of externally rated SMEs and interviews with bank clerks and focuses on answering following questions: How does an external rating for SMEs work and what are its theoretical potentials and weaknesses? What are companies’ experiences with external ratings, especially vis-à-vis banks? Can external ratings ameliorate the structural and financial problems of SMEs? Do banks take an external rating into consideration when granting credits? What are the influencing factors and future prospects? A book for SMEs, banks, rating agencies, consultancies, students and all those who are interested in rating, the consequences of Basel II and approaches to improve the competitiveness of SMEs.