UK credit and discouragement during the GFC

Marc Cowling, Weixi Liu, Maria Minniti, Ning Zhang

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

The availability of credit to entrepreneurs with good investment opportunities is an important facilitator of economic growth. Under normal economic conditions, most entrepreneurs who requested loans receive them. In a global financial crisis, popular opinion is that banks are severely restricting lending to smaller businesses. This assumes that low levels of investment are caused by supply-side restrictions in the credit market. Little is said about potential changes in the demand for credit and how it is influenced by entrepreneurs’ perceptions about supply-side restrictions. One particularly interesting, and under-researched, group of small businesses is that who have potentially good investment opportunities, but are discouraged from applying for external funding as they fear rejection. In this study, we question whether these entrepreneurs were correct in their assumptions. We find that levels of discouragement are quite low in general at 2.7 % of the total smaller business population. Further analysis implies that 55.6 % of discouraged borrowers would have got loans had they applied.
LanguageEnglish
Pages1049-1074
Number of pages26
JournalSmall Business Economics
Volume47
Issue number4
Early online date6 Jun 2016
DOIs
StatusPublished - 31 Dec 2016

Cite this

UK credit and discouragement during the GFC. / Cowling, Marc; Liu, Weixi; Minniti, Maria ; Zhang, Ning.

In: Small Business Economics, Vol. 47, No. 4, 31.12.2016, p. 1049-1074.

Research output: Contribution to journalArticle

Cowling, Marc ; Liu, Weixi ; Minniti, Maria ; Zhang, Ning. / UK credit and discouragement during the GFC. In: Small Business Economics. 2016 ; Vol. 47, No. 4. pp. 1049-1074.
@article{d0f726ce222c48808d2aa0d3ace387c3,
title = "UK credit and discouragement during the GFC",
abstract = "The availability of credit to entrepreneurs with good investment opportunities is an important facilitator of economic growth. Under normal economic conditions, most entrepreneurs who requested loans receive them. In a global financial crisis, popular opinion is that banks are severely restricting lending to smaller businesses. This assumes that low levels of investment are caused by supply-side restrictions in the credit market. Little is said about potential changes in the demand for credit and how it is influenced by entrepreneurs’ perceptions about supply-side restrictions. One particularly interesting, and under-researched, group of small businesses is that who have potentially good investment opportunities, but are discouraged from applying for external funding as they fear rejection. In this study, we question whether these entrepreneurs were correct in their assumptions. We find that levels of discouragement are quite low in general at 2.7 {\%} of the total smaller business population. Further analysis implies that 55.6 {\%} of discouraged borrowers would have got loans had they applied.",
author = "Marc Cowling and Weixi Liu and Maria Minniti and Ning Zhang",
year = "2016",
month = "12",
day = "31",
doi = "10.1007/s11187-016-9745-6",
language = "English",
volume = "47",
pages = "1049--1074",
journal = "Small Business Economics",
issn = "0921-898X",
publisher = "Springer Netherlands",
number = "4",

}

TY - JOUR

T1 - UK credit and discouragement during the GFC

AU - Cowling, Marc

AU - Liu, Weixi

AU - Minniti, Maria

AU - Zhang, Ning

PY - 2016/12/31

Y1 - 2016/12/31

N2 - The availability of credit to entrepreneurs with good investment opportunities is an important facilitator of economic growth. Under normal economic conditions, most entrepreneurs who requested loans receive them. In a global financial crisis, popular opinion is that banks are severely restricting lending to smaller businesses. This assumes that low levels of investment are caused by supply-side restrictions in the credit market. Little is said about potential changes in the demand for credit and how it is influenced by entrepreneurs’ perceptions about supply-side restrictions. One particularly interesting, and under-researched, group of small businesses is that who have potentially good investment opportunities, but are discouraged from applying for external funding as they fear rejection. In this study, we question whether these entrepreneurs were correct in their assumptions. We find that levels of discouragement are quite low in general at 2.7 % of the total smaller business population. Further analysis implies that 55.6 % of discouraged borrowers would have got loans had they applied.

AB - The availability of credit to entrepreneurs with good investment opportunities is an important facilitator of economic growth. Under normal economic conditions, most entrepreneurs who requested loans receive them. In a global financial crisis, popular opinion is that banks are severely restricting lending to smaller businesses. This assumes that low levels of investment are caused by supply-side restrictions in the credit market. Little is said about potential changes in the demand for credit and how it is influenced by entrepreneurs’ perceptions about supply-side restrictions. One particularly interesting, and under-researched, group of small businesses is that who have potentially good investment opportunities, but are discouraged from applying for external funding as they fear rejection. In this study, we question whether these entrepreneurs were correct in their assumptions. We find that levels of discouragement are quite low in general at 2.7 % of the total smaller business population. Further analysis implies that 55.6 % of discouraged borrowers would have got loans had they applied.

UR - http://dx.doi.org/10.1007/s11187-016-9745-6

U2 - 10.1007/s11187-016-9745-6

DO - 10.1007/s11187-016-9745-6

M3 - Article

VL - 47

SP - 1049

EP - 1074

JO - Small Business Economics

T2 - Small Business Economics

JF - Small Business Economics

SN - 0921-898X

IS - 4

ER -