TY - JOUR
T1 - UK credit and discouragement during the GFC
AU - Cowling, Marc
AU - Liu, Weixi
AU - Minniti, Maria
AU - Zhang, Ning
N1 - Publisher Copyright:
© 2016, Springer Science+Business Media New York.
PY - 2016/12/1
Y1 - 2016/12/1
N2 - The availability of credit to entrepreneurs with good investment opportunities is an important facilitator of economic growth. Under normal economic conditions, most entrepreneurs who requested loans receive them. In a global financial crisis, popular opinion is that banks are severely restricting lending to smaller businesses. This assumes that low levels of investment are caused by supply-side restrictions in the credit market. Little is said about potential changes in the demand for credit and how it is influenced by entrepreneurs’ perceptions about supply-side restrictions. One particularly interesting, and under-researched, group of small businesses is that who have potentially good investment opportunities, but are discouraged from applying for external funding as they fear rejection. In this study, we question whether these entrepreneurs were correct in their assumptions. We find that levels of discouragement are quite low in general at 2.7 % of the total smaller business population. Further analysis implies that 55.6 % of discouraged borrowers would have got loans had they applied.
AB - The availability of credit to entrepreneurs with good investment opportunities is an important facilitator of economic growth. Under normal economic conditions, most entrepreneurs who requested loans receive them. In a global financial crisis, popular opinion is that banks are severely restricting lending to smaller businesses. This assumes that low levels of investment are caused by supply-side restrictions in the credit market. Little is said about potential changes in the demand for credit and how it is influenced by entrepreneurs’ perceptions about supply-side restrictions. One particularly interesting, and under-researched, group of small businesses is that who have potentially good investment opportunities, but are discouraged from applying for external funding as they fear rejection. In this study, we question whether these entrepreneurs were correct in their assumptions. We find that levels of discouragement are quite low in general at 2.7 % of the total smaller business population. Further analysis implies that 55.6 % of discouraged borrowers would have got loans had they applied.
KW - Bank lending
KW - Credit discouragement
KW - Credit rationing
KW - Small business finance
UR - http://www.scopus.com/inward/record.url?scp=84996484144&partnerID=8YFLogxK
U2 - 10.1007/s11187-016-9745-6
DO - 10.1007/s11187-016-9745-6
M3 - Article
AN - SCOPUS:84996484144
SN - 0921-898X
VL - 47
SP - 1049
EP - 1074
JO - Small Business Economics
JF - Small Business Economics
IS - 4
ER -