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

Freel, M., Carter, S. , Tagg, S. and Mason, C. (2012) The latent demand for bank debt: characterizing "discouraged borrowers". Small Business Economics, 38(4), pp. 399-418. (doi: 10.1007/s11187-010-9283-6)

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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:Articles
Glasgow Author(s) Enlighten ID:Mason, Professor Colin and Carter, Professor Sara
Authors: Freel, M., Carter, S., Tagg, S., and Mason, C.
College/School:College of Social Sciences > Adam Smith Business School > Management
Journal Name:Small Business Economics
ISSN (Online):1573-0913
Published Online:13 April 2010

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