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The latent demand for bank debt:characterizing discouraged borrowers

Freel, Mark and Carter, Sara and Tagg, Stephen and Mason, Colin (2012) The latent demand for bank debt:characterizing discouraged borrowers. Small Business Economics, 38 (4). pp. 399-418. ISSN 0921-898X

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Abstract

Concerns that small firms encounter credit constraints are well entrenched in the literature, despite widespread empirical evidence that a relatively small proportion of small firms have their loan applications rejected. However, many firms may be discouraged from applying for fear of rejection. These businesses are the focus of this paper. Based on responses to a large-scale postal survey of UK small and medium-sized enterprises (SMEs), we find that twice as many businesses were discouraged from applying for a bank loan than had their loan request denied. More particularly, we observe a number of distinguishing characteristics of “discouraged borrowers” (relative to applicants). These include: strategy, sector, prior entrepreneurial experience and banking relationships. The implications of our findings for policy and future research are briefly discussed.

Item Type: Article
Journal or Publication Title: Small Business Economics
Uncontrolled Keywords: Small firms ; Funding gap ; Banks ; Loan finance ; Loan denial ; Discouragement
Subjects:
Departments: Lancaster University Management School > Institute for Enterprise & Entrepeneurial Development (IEED)
ID Code: 64246
Deposited By: ep_importer_pure
Deposited On: 26 Apr 2013 09:45
Refereed?: Yes
Published?: Published
Last Modified: 22 Nov 2017 22:53
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/64246

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