Understanding the Dynamics of UK Covid-19 SME Financing

Raffaella Calabrese; Marc Cowling; Weixi Liu

doi:10.1111/1467-8551.12576

Understanding the Dynamics of UK Covid-19 SME Financing

Raffaella Calabrese, Marc Cowling, Weixi Liu

Research output: Contribution to journal › Article › peer-review

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Abstract

The scale of the UK government's response to the Covid-19 crisis after the first lockdown in March 2020 was unprecedented. For the business sector, two financing schemes were particularly relevant: the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS). Both were designed to support the capitalization of businesses through this difficult trading period. In this paper, we use data covering the first two quarters of the Covid-19 crisis to explore the dynamics of small and medium-sized enterprise (SME) financing and in particular the role of government support schemes. Our findings show that 92.1% of all debt funds provided in this period were backed by the UK government, which compares to less than 5% under normal circumstances. We find that the demand, supply and government share of SME lending increased from Covid-19 quarter 1 (April–June 2020) to quarter 2 (July–September 2020), that micro and small businesses had the highest demand for loans, and that better-performing firms were more likely to receive loans. Further, in a world where more loan requests than ever were granted, the government share of this pool of loans had a different risk profile than the small pool of non-government-backed loans.

Original language	English
Pages (from-to)	657-677
Number of pages	21
Journal	British Journal of Management
Volume	33
Issue number	2
Early online date	14 Dec 2021
DOIs	https://doi.org/10.1111/1467-8551.12576
Publication status	Published - 30 Apr 2022

Bibliographical note

Funding Information:
Brault and Signore ( 2019 ) investigated the impact of around 360,000 guaranteed loans over 19 European countries under the SME Guarantee Facility of the European Union's MAP and CIP programmes from 2002 to 2016. The authors found that guaranteed loans had a positive impact on firms’ assets, sales and employment, and decreased their probability of default. Cerulli and Ventura ( 2021 ) analyse the Italian Central Guarantee Fund for SMEs funded by the Italian government, over the period 1999−2006. Their main finding is that the effectiveness of guaranteed loans increases as the coverage ratio increases up to 70% and then decreases.

ASJC Scopus subject areas

General Business,Management and Accounting
Strategy and Management
Management of Technology and Innovation

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10.1111/1467-8551.12576

BJM accepted_FINAL.PDF
This is the peer reviewed version of the following article: Calabrese, R., Cowling, M. and Liu, W. (2021), Understanding the Dynamics of UK Covid-19 SME Financing. Brit J Manage., which has been published in final form at https://doi.org/10.1111/1467-8551.12576. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Accepted author manuscript, 951 KB

Cite this

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Understanding the Dynamics of UK Covid-19 SME Financing

Abstract

Bibliographical note

ASJC Scopus subject areas

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