 The impact of late payments on SMEs’ access to finance: Evidence from credit rationing and loan termsOrcun Kaya Economic Modelling, 2024, vol. 141, issue C Abstract: Late payments represent a significant threat to the financial resilience of European SMEs, with wide-reaching implications. While existing literature highlights the detrimental impact of late payments on SME liquidity and insolvency risk, the specific effects on credit availability and loan terms remain underexplored. Using unique firm-level data from 11 European countries over the period 2019–2023, we examine how late payments impact SMEs’ access to finance. We document that SMEs experiencing frequent or occasional late payments face difficulties in accessing finance. The primary mechanism is credit rationing, as banks potentially view cash flow uncertainty as an increased risk, prompting them to restrict lending. The increased risks perceived by banks translate into less favorable loan conditions for SMEs facing late payments, such as higher interest rates and smaller loan amounts. These findings highlight the importance of strengthening and enforcing the Late Payments Directive to address the persistent issue of late payments. Keywords: Late payments; SMEs; Access to finance; Credit rationing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:141:y:2024:i:c:s0264999324002530 DOI: 10.1016/j.econmod.2024.106896 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.