The European Union's financial services commissioner on Saturday urged the need to wean firms off being too reliant on traditional bank money, saying crowdfunding and venture capital are two "interesting" sources of funding.
Jonathan Hill, EU commissioner for financial services and capital markets, told CNBC that small-and-medium-sized businesses in the 28-nation bloc are too dependent on traditional bank financing which can hurt the economy if things turn sour in the banking sector.
"If you've got a system that's very dependent on one source of funding, and you have a contraction in bank funding like we had, then that has a very real knock onto the economy," Hill said on the side lines of the Ambrosetti Forum in Italy.
"If we can diversify and spread it, we can help also achieve a greater degree of financial stability," he added.
After the financial crisis hit, banks severely pulled backlending to businesses, making it harder for firms to borrow money through traditional avenues.
Hill, a British national, who was appointed in the position last year, is looking to push the "capital market union" agenda to harmonize capital markets across the whole of the EU.
One of the problems, Hill said, was that European firms were going to the U.S. in search of funding. This is a particular theme seen in the technology sector where European start-ups go to the States with the view of raising larger funding rounds at higher valuations.
Hill said that looking at boosting areas such as crowdfunding and venture capital in Europe could stop this, but the EU would have to be careful not to over-regulate and stymie growth.
"I think that it would be good if we could get more of those sources of funding coming from within Europe. So that's why we'll be making a priority of looking at venture capital," the commissioner said.
"I think crowdfunding is an interesting area, still small, and there my instinct with crowdfunding is this is something that's emerging rapidly…and I think we've got to be careful not to regulate too soon on something like that, that might actually have the unintended effect of choking off that growth," he said.
Businesses are increasingly turning to non-bank lending. Non-bank lenders recorded 195 deals in the U.K. and mainland Europe last year, up 43 percent from 136 in 2013, according to Deloitte. And in Europe, venture capital firms poured $10.5 billion into companies in 2014, up 27 percent on the year before, according to an EY study.