TERMS OF LENDING FOR SMALL BUSINESS LINES OF CREDIT: THE ROLE OF LOAN GUARANTEES

Raymond Posey and Alan K. Reichert

The International Journal of Business and Finance Research, 2011, vol. 5, issue 1, 91-102

Abstract: This study examines the role of loan guarantees in lines of credit granted to small businesses. Since there is evidence of simultaneity among lending terms, two-stage instrumental variable procedures are used to obtain consistent parameter estimates. The findings suggest the presence of a loan guarantee is associated with lower interest rates and smaller lines of credit and that loan guarantees and collateral are to some extent substitutes in that loans guarantees are a close substitute for collateral but collateral does not always serve as a close substitute for loan guarantees. Furthermore, firms with longer banking relationships and/or fewer banking relationships are less likely to have loan guarantees.

Keywords: Term of lending; bank relationships; line of credit (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v5n1-2011/IJBFR-V5N1-2011-7.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:5:y:2011:i:1:p:91-102

Access Statistics for this article

The International Journal of Business and Finance Research is currently edited by Terrance Jalbert

More articles in The International Journal of Business and Finance Research from The Institute for Business and Finance Research
Bibliographic data for series maintained by Mercedes Jalbert ( this e-mail address is bad, please contact ).