Financing small and innovative firms during COVID-19

Marc Cowling, Weixi Liu, Yujia Chen, Raffaella Calabrese, Tim Vorley

Research output: Contribution to journalArticlepeer-review


Previous research on the financing of smaller innovative firms has established that being small per se creates problems in accessing finance, but being small and innovative adds another layer of difficulty. This new research explicitly questions whether the Covid-19 crisis has added to the debt access problems of an already disadvantaged group of firms. Using a unique Covid-19 period dataset of 9000 UK SMEs, we find that the most innovative firms had the highest demand for loans during the Covid-19 crisis and evidence that those firms trying to introduce new products and services faced more severe borrowing constraints. As the vast majority of Covid-19 loans in the UK were government guaranteed, we also find that several classes of innovative firms found it more difficult to access government supported loans. It was also not the case that those most impacted by the crisis had the most privileged access to government loan schemes despite a greater need for liquidity. These findings have potential implications for financing innovative firms in the post-Covid-19 world, such as proposing a specific innovation loan guarantee scheme with higher than conventional guarantee rates.

Original languageEnglish
Number of pages28
JournalEconomics of Innovation and New Technology
Early online date27 Dec 2023
Publication statusPublished - 27 Dec 2023

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