Banking relationship and credit terms: empirical evidence from Portuguese small firms

Abstract

Based on a sample of Micro and Small-sized Enterprises (MSE) financed by a large Portuguese bank, this study seeks to assess the importance of the banking relationship for MSE to obtain better credit terms, i.e. higher credit limit, lower risk premium and less probability that collateral must be provided. We conclude that long term banking relationship alone is not important for firms to obtain better bank credit terms. However, greater borrowing concentration allows MSE to obtain a lower risk premium and a higher limit of credit. The magnitude of these impacts are affected by some specificities related to firm size, economic-financial performance and the position of the lending bank in the local banking market.

Relationship lending and access to financial services by SMEs in Kenya

“…In the same way, Bolton, Freixas, Gambacorta, and Mistrulli (2016) informed that increase loan facility of SMEs occurs when relationship lending declines. Conversely Mathias, Serrasqueiro and Costa (2010) contended that lengthier lending relationship doesn't have significant effect of improving credit access. The conceptual framework model shows the interaction between research variables centered on verified relationship amongst the study variables from literature reviewed.…”