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Stack of Books mockup Journal of Small Business Management JSBM

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

By Marc Cowling,Neil Lee & Elisa Ughetto | Originally published online: 19 Nov 2019 ABSTRACT Access to inexpensive short-term credit from banks is vital for many small a...

Small business mamagement

By Marc Cowling, Neil Lee & Elisa Ughetto

Originally published online: 19 Nov 2019

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.

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About the Author:

Ayman Tarabishy
Ayman Tarabishy
Dr. Ayman El Tarabishy is the deputy chair of the Department of Management and a teaching professor of management at the George Washington University School of Business. His expertise involves entrepreneurship and creative, innovative, humane-focused practices. In addition, Dr. El Tarabishy is the president & CEO of the International Council fo...
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