How to finance the missing middle

Debt or stocks ? Banks or equity markets ? As France fears for its petite et moyennes enterprises, whose access to bank loans is going to be more expensive, the chief executive of the London Stock Exchange Group insists that even small entreprises could be financed through equity. The biggest problem of financing SMEs is informational asymmetries, as the reason why they are financed by debt where the interest rate of the loan function as a risk management mechanisms. So Mr. Rollet seems to think simple disclosure would be enough:

The cost of satisfying disclosure requirements must be reduced, as well as the time required to bring an issue to market. A shelf registration system would allow companies greater flexibility, accessing the public funding markets while satisfying all applicable disclosure requirements. The recent US JOBS Act – Jump Start our Business Start-ups – is designed to reinvigorate access to equity funding for entrepreneurs. The UK needs its own JOBS Act.

He misses two points, to my opinion: 

1. He seems to equates information with knowledge. SMEs businesses are blurry and banks are reluctant to finance them if they do, the costs of capital - the interest rate - reflect the uncertainty inherent in any young business. But disclosing more accounting data or being more transparent will not reduce this uncertainty. The right equity investors for SMEs are the one capable of manufacturing knowledge with information. 

2. And that is why SMEs need finance accompanied with management and experience. So I don't think that the "hands off" approach to equity finance of SMEs through stock market that Mr. Rollet advocates is the right one. The "hands in" approach to private equity though, might be much more appropriate. New studies (NBER, University of Chicago) show that private equity contributes greatly to employment through SMEs growth.