The role of relationships in small-business lending

Ben Craig, William E. Jackson and James Thomson

Economic Commentary, 2005, issue Oct

Abstract: In the presence of imperfect information, both large and small banks try to find alternative ways to identify creditworthy borrowers. Lending relationships are one way to go about this. Relationships between banks and small businesses tend to be much closer than those between banks and large businesses. This Commentary explains why lending relationships are valuable to both small businesses and banks, how they reduce information-lending problems, and what other solutions exist to help in the reduction.

Keywords: Loans; small business finance; Credit scoring systems (search for similar items in EconPapers)
Date: 2005
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