ALTERNATIVE SOURCES OF FINANCING OF COMPANIES THROUGH PRIVATE EQUITY AND VENTURE CAPITAL FUNDS IN CENTRAL AND EAST EUROPE

The aim of this paper is to show that entrepreneurs in Central, Eastern Europe (CEE), and Croatia are oriented exclusively toward bank financing as the basis for obtaining additional capital. Even though the Croatian market, same as the European market in general, is bank-oriented, a wider market should be aware of the existence of alternative sources of corporate financing, whether it is a variety of funds, and agencies or autonomous issuance of securities and financial derivatives. The development of entrepreneurship in CEE countries over the past few years was limited due to various macroeconomic events, and the specific problems they entailed. These limitations and changes have particularly affected the entrepreneurship financing opportunities, as the countries failed to develop an adequate system of financial support for entrepreneurship thus far. There is a necessity of shifting to other, more sophisticated forms of finance. In this sense, it is necessary to create a stimulating environment for the development of venture capital and private equity funds. CEE entrepreneurs, modeled on European Union countries, focus solely on bank financing. Bank loans still make a relatively fast and inexpensive way of financing. However, in our opinion, it is not the speed of the approval procedure that is the main reason for applying for bank loans, but rather the ignorance of entrepreneurs about alternative sources of financing that are present in the market, although still relatively unknown. The third reason for this situation authors found in the fact that foreign venture capital and private equity funds in CEE countries face the same obstacles as other foreign investors, such as complex property and legal relations, corruption, networking, and poor corporate governance.