Determinants of Bank Involvement with SMEs: A Survey of by Victor U. Ekpu

By Victor U. Ekpu

This publication is a accomplished, but concise textual content that brings jointly all points of SME banking theories and empirical stories in a single textual content. The ebook comprises the newest coverage debates on funds construction and credits rationing and the relative position of demand-side and supply-side elements affecting SME financing. Readers will comprehend the borrower-specific, lender-specific and enterprise atmosphere drivers of financial institution finance for SMEs in addition to the determinants of personal loan agreement phrases, rather the danger top rate and collateral. Readers also will know the way personal loan officials gather proprietary info on SMEs and observe a number of lending thoughts, corresponding to financial plan lending, dating lending and credits scoring to the personal loan underwriting method. furthermore, the ebook additionally positive factors fresh developments at the upward thrust of different finance intermediaries reminiscent of on-line peer-to-peer creditors and the aggressive implications for normal banks offering loans to SMEs. Findings from this paintings will therefore be of specific curiosity to advertisement bankers, bank-dependent small company debtors in addition to coverage makers, and researchers in valuable banks, improvement banks, improvement businesses and overseas monetary associations.

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Additional info for Determinants of Bank Involvement with SMEs: A Survey of Demand-Side and Supply-Side Factors (SpringerBriefs in Finance)

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J Account Res 18:109–131 Petersen MA, Rajan RG (1994) The benefits of firm-creditor relationships: Evidence from small business data. J Finance 49:3–37 Rajan RG (1992) Insiders and outsiders: the choice between informed and arm’s-length debt. J Finance 47:1367–1400 Sargent M, Young JE (1991) The entrepreneurial search for capital: a behavioural science perspective. Entrepreneurship Reg Dev 3:237–252 References 43 Scherr FC, Sugrue TF, Ward JB (1993) Financing the small firm start-up: determinants of debt use.

This sort of monitoring tells a great deal how the business managers are managing its working capital. It also “provides the early warning system for potential problems” and is also used to form judgments on the ability of the SME owner to run the business profitably (Berry et al. 1993: 146). On the link between a firm’s liquidity and the type of lender, Cole et al. (2004) finds that firms with more liquid assets tend to apply to larger banks. This is perhaps due to the fact that they are able to obtain larger loan amounts from large banks.

Berger et al. 2005a, b) owing mainly to competition from other financial service providers. Because large banks tend to have weaker relationships with borrowers, they tend to employ more transactions lending approaches. On the contrary, the relationship between banks and firms tend to be long-lived and more exclusive when the firm in consideration borrows from a small bank. This confirms the assertion made by Rajan (1992) that small firms tend to be tied to banks that have accumulated soft information on them over time.

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