Barriers faced by SMEs in raising bank finance

Abstract

2Purpose -This paper uses univariate statistical analysis to investigate barriers to raising bank finance faced by UK small and medium-sized enterprises (SMEs), specifically the impact of personal characteristics (ethnicity, gender and education).Design/methodology/approach -We developed a conceptual model and analysed the results of a telephone survey of 400 SMEs conducted (before the "credit crunch") by the Barclays Bank small business research team on our behalf. The survey was based on a large stratified random sample drawn from the Bank"s entire SME population.Findings -We found that education made little difference to sources of finance, except that those educated to A-level more frequently used friends and family and remortgaged their homes. However, graduates had the least difficulties raising finance. Though statistically insignificant, women respondents found it easier to raise finance than men.The survey confirmed that -and this finding was statistically significant -ethnic minority businesses, particularly black owner-managers, had the greatest problem raising finance and hence relied upon "bootstrapping" as a financing strategy.Research limitations/implications -The study makes an important contribution to filling a research gap, given the critical need of policy-makers to understand differentials between different types of owner-managers. It brings new insights into its field -access to finance -and with respect, especially, to marginalised groups.Originality/value -The paper adopts a different approach than many prior studies, with a large sample and robust analysis, to explore a critical need-to-know area in a new wayboth for policy-makers and academics in the field of SME finance.

The Effect of Business Environment and Entrepreneurs’ Gender on Perception of Financial Risk in The Smes Sector

“…The empirical results of Irwin and Scott (2010) suggest that men are more financially constrained than women, due to past repayment history and less commitment to their businesses (18% of men faced difficulties in financing the start-ups of their businesses compared to 12% of women: however, the result is not statistically significant at the 5% level). Carter, Shaw, Lam and Wilson (2007) found some distinct criteria for loan processing, on both the supply and demand side: it makes a difference whether the loan applicant is male or female, and whether the loan officer is a male or female.…”

Discouraged Advisees? The Influence of Gender, Ethnicity, and Education in the Use of Advice and Finance by UK SMEs

“…Established literature highlights the perceived impact of owner-manager (O-M) characteristics -gender, ethnicity and education (human capital) -in either enabling or constraining access to finance (Deakins et al, 1994;Ram and Smallbone, 2001;Irwin and Scott, 2006;Carter and Shaw, 2006;Smith-Hunter, 2006). Although these and other studies highlight the influence of additional factors (such as sector or size), the notion of a direct link between O-M characteristics and access to finance (Figure 1) is overly simplistic and is challenged in this paper.…”

The Relationship between the Risk of a Change of the Interest Rate and the Age of Entrepreneurs among Slovak SMEs

“…This is also the case of Slovak SMEs ( Jakubec et al, 2012). Majková (2008) and Irwin and Scott (2010) prove that the firm size is an important factor in the assessment of credit risk. Smaller companies have the biggest problem with collateral requirements (Sobeková, 2011).…”

“…Their share on total number of companies in the EU, the US and also in Slovakia is almost 99 % (Bhaird, 2010;Belás et al, 2015a, Kozubíková et al, 2015Sobeková -Majková, 2011). Their small size is according to such authors as Steinerowska-Streb and Steiner (2014), Irwin and Scott (2010), Mercieca et al (2009), Belás (2015b), Dong and Men (2014), Cheng, Tang and Shi (2012) often a reason why they more intensively face the financial risk and also the credit risk. Also Vos et al (2007), Bottazzi et al (2014), Lazányi (2014), Oliveira and Fortunato (2006), Dong and Men (2014), Hernández-Cánovas and Martínez-Solano (2010), Bougheas et al (2006), Pickernell et al (2011), Riding et al (2012) declare that the credit risk is higher in the group of younger entrepreneurs.…”