Access to inexpensive short-term credit from banks is vital for many small and medium enterprises (SMEs), which face liquidity problems because of an imbalance between cash outflows and receipt of outstanding payments. This article investigates the key determinants of short-term credit access and pricing for UK SMEs, disentangling between regional effects and firm-specific effects (that is, credit risk ratings). We use a large dataset of 30,183 responses to six waves of the SME Finance Monitor survey. While there are underlying differences at the firm level in risk behavior across regions, our key finding is that, faced with the same risk, banks do react fairly to funding applications in terms of access but not price at the regional level. We conclude that regional differences directly and indirectly affect the way banks allocate and price short-term credit. There is evidence of a peripheral region price penalty.

The price of a disadvantaged location: Regional variation in the price and supply of short-term credit to SMEs in UK / Cowling, M.; Lee, N; Ughetto, E. - In: JOURNAL OF SMALL BUSINESS MANAGEMENT. - ISSN 0047-2778. - 58:3(2020), pp. 648-668. [10.1080/00472778.2019.1681195]

The price of a disadvantaged location: Regional variation in the price and supply of short-term credit to SMEs in UK

UGHETTO, E
2020

Abstract

Access to inexpensive short-term credit from banks is vital for many small and medium enterprises (SMEs), which face liquidity problems because of an imbalance between cash outflows and receipt of outstanding payments. This article investigates the key determinants of short-term credit access and pricing for UK SMEs, disentangling between regional effects and firm-specific effects (that is, credit risk ratings). We use a large dataset of 30,183 responses to six waves of the SME Finance Monitor survey. While there are underlying differences at the firm level in risk behavior across regions, our key finding is that, faced with the same risk, banks do react fairly to funding applications in terms of access but not price at the regional level. We conclude that regional differences directly and indirectly affect the way banks allocate and price short-term credit. There is evidence of a peripheral region price penalty.
File in questo prodotto:
File Dimensione Formato  
Cowling_Lee_Ughetto_JSBM.pdf

non disponibili

Tipologia: 2a Post-print versione editoriale / Version of Record
Licenza: Non Pubblico - Accesso privato/ristretto
Dimensione 1.74 MB
Formato Adobe PDF
1.74 MB Adobe PDF   Visualizza/Apri   Richiedi una copia
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11583/2760352