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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
    Subjects: Social Sciences > Commerce
    Department: Strathclyde Business School > Hunter Centre For Entrepreneurship
    Strathclyde Business School > Marketing
    Related URLs:
    Depositing user: Miss Carol Ann Balloch
    Date Deposited: 07 Oct 2010 10:07
    Last modified: 15 Feb 2013 11:23
    URI: http://strathprints.strath.ac.uk/id/eprint/27642

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