The low level of capital in VSEs increases their fragility

The very small enterprises (VSEs) studied here account for 38% of enterprises in the mainly non-agricultural and non-financial market sectors. They embody the local economic fabric: small retail businesses, bars, restaurants, garages, etc. Highly diversified in terms of sector, they are often new (less than 5 years old), and the majority have no employees; they are concentrated in Île-de-France and the south of France.

It is in the interest of VSEs to have sufficient capital to cope with cyclical fluctuations and to develop, especially when access to bank credit is more difficult or more expensive because of their size. In all sectors, the amount of capital in the balance sheet of VSEs increased and the debt ratio decreased between 2014 and 2018.

Nevertheless, significant disparities remain between sectors: in 2018, the two most capitalised sectors were business services and information-communication, as in 2014. The least capitalised areas were still the hotel and restaurant industry, personal services and real estate.

Over the period 2014-2018, one in five VSEs had negative equity. While 1.3% of VSEs experienced a first failure in 2019, the failure rate for those with negative equity was 3.0%. New VSEs were more affected. The presence of negative capital is the most important factor influencing the risk of failure.