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The latent demand for bank debt : characterizing 'discouraged borrowers'

Freel, M. and Carter, S.L. 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
ID code: 27642
Keywords: small firms, funding gap, banks, loan finance, loan denial, discouragement, Commerce, Business, Management and Accounting(all), Economics and Econometrics
Subjects: Social Sciences > Commerce
Department: Strathclyde Business School > Hunter Centre For Entrepreneurship
Strathclyde Business School > Marketing
Depositing user: Miss Carol Ann Balloch
Date Deposited: 07 Oct 2010 09:07
Last modified: 27 Jun 2014 04:04
URI: http://strathprints.strath.ac.uk/id/eprint/27642

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